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Energy planning in Guatemala
Energy planning in Guatemala Response to crisis
Allan K. Fitzsimmons and Terry L. Melntosh
Heavy economic burdens associated with rapidly escalating costs of imported petroleum have forced Guatemala's government to formulate and i m p l e m e n t a new energy policy, which recognizes the high degree of dependence on foreign oil for commercial energy as well as the need to include social and environmental factors in policy formulation. The government has presented a programme that depends on fuel diversification and the development of indigenous energy sources to provide a longterm solution, while recognizing that increased import costs are necessary over the short term. Professor Fitzsimmons is with the Department of Geography and Regional Science, The George Washington University, Washington, DC 2 0 0 5 2 ; Professor Mcliqtosh is with the Department of Geography, University of Kentucky, USA. Research for information contained in this article was sponsored by a grant from the National Science Foundation (USA). 1World
Energy Supplies,
1950-1974,
United Nations, Department of Economic and Social Affairs, New York, 1976 (especially Table 2). aEfrain Friedman, 'Financing energy in developing countries', Energy Policy, Vol 4, No 1, March 1976, pp 37-49, 3Thomas T. Veblin, 'The urgent need for continued on p 15
14
Like developed nations, developing countries require ever increasing amounts of commercial energy to fuel national economies. Indeed, owing to industrial expansion, mechanization of transport, growing populations, and the increased use of technology in agricultural sectors, the rate of increase of developing countries' consumption of commercial energy has outpaced that of developed countries since 1950. t For most developing countries the bulk of this demand has been met by petroleum imports. Consequently, when international petroleum prices quadrupled during 1973-74, severe strains were placed on the national economies of many less developed countries. 2 These pressures forced many governments to give new priority to often neglected energy planning. Our purpose here is to examine the energy background of Guatemala and the long-term response of the government in efforts aimed at satisfying increasing demands while also reducing national dependence on costly energy-related imports. Until recently, Guatemala's energy base was dominated by noncommercial fuels (Table 1). Chief among such fuels is wood, which has long been the principal fuel of the rural population. Deforestation, attributable to the use of fuel wood, has led serious environmental and economic consequences brought on by extensive erosion and gullying, which is accompanied by reduced agricultural productivity on hillsides and valley bottoms. Such problems are particularly acute in the densely populated western highlands where a 1964 study indicated that wood supplied 85% of residential fuel. 3 The leap in petroleum prices in 1973-74 raised justifiable concern over the future of the limited forest lands remaining in the region, and the environmental and economic impact of continued or accelerated use of fuel wood) On the Pacific coastal plain, with its numerous exportoriented agricultural estates, sugar cane pulp is another important non-commercial fuel, especially in the operation of the area's sugar cane processing plants. However, the shift to commercial fuels, while far from complete, is well underway and the traditional fuels' share of the total energy base will continue to diminish. Between 1950 and 1974, annual consumption of commercial
ENERGY POLICY March 1978
Energy planning in Guatemala Table 1. Guatemala's consumption of energy by origin for selected years (%) Energy source
1950
1955
1960
1965
1970
1974
Vegetal (wood, sugar pulp) Hydro Thermo
63.0 3.2 33.8
59.9 3.7 36.4
55.0 3.7 41.3
51.9 2.3 45.8
50.6 6.5 42.9
45.8 5.1 49.1
Source: Consejo Nacional de Planificacibn Econ6mica, Guatemala.
con tinGe d from 1) 14 forest conservation in highland Guatemala', Biological Conservation, Vol 9, 1976, pp 141-154. 4plan de Desarrollo 1975/79: Politicas de Desarrollo de/Sector Energia, Consejo Nacional de Planificaci6n Econ6mica, Guatemala, July 1975, p 2. 5 Peter Odell, Oil and World Power: Background to the Energy Crisis, Penguin, Harmondsworth, UK, 1974, 3 ed, especially Chapters 2, 7, 8 and 9. 6 Informe Estadistico, 1974, Instituto Nacional de Electrificaci6n, Guatemala, 1975, p 13. 7 Consejo Nacional de Planificaci6n Econ6mica, op cit, Ref 4, p 13. 8 Direcci6n General de Estadistica, Importaciones: Partida-Paiz. Energy imports are listed under category 300 of the NAUCA code.
ENERGY POLICY March1978
energy increased from 0.3 million tonnes coal equivalent (mtce) to 1.43 mtce, while per capita consumption rose from 106 to 256 kg of coal equivalent during the same period? Demand for electrical energy rose on average by 12% annually between 1965 and 1974. 4 These increases were associated with government policies designed to increase industrialization through import substitution, extend the nation's electrical power grid, and expand the national truck fleet and road network. Interwoven with these factors is the influence of a growing population which increased from slightly less than 4 million in 1960 to more than 6 million in 1976. International petroleum exploration and development during the 1950s and 1960s made available cheap imported petroleum for world buyers? Ready access to this versatile and easily handled fuel prompted governments to forego development of indigenous energy industries in many countries where such industries were not price competitive or protected by government policies - witness the collieries of Western Europe. In Guatemala, suspected petroleum deposits were not of sufficient size to attract the extensive foreign investment and technology required for their development during the 1950s and 1960s. During this period there also was already an excess of supply over demand on world markets, and no incentive for development of new sources in untried regions. Finally, Guatemala's domestic market for energy was too small to serve as an investment stimulus. Faced with a rapid increase in demand for commercial energy, the government could seek to develop indigenous resources on its own or turn to imports. Lack of internal expertise necessary to develop either suspected petroleum deposits or domestic hydroelectric potential, combined with the high cost of such efforts, and the pressing needs for capital investment in such other fields as transport, health, and education, made the government opt for cheap imported petroleum. Such reliance became almost total - i n 1974 imported petroleum provided 97% of the commercial energy consumed, j At present Guatemala is totally dependent on imports to fuel its mechanized transport system, thermal industrial requirements, and for over half of its electrical energy. 6 When oil was $3 per barrel the policy of import dependence was easily justifiable, but with costs now exceeding $12 per barrel such a policy has become a major economic liability. The quadrupling of oil prices from an average of $3.21 per barrel in 1972 to $12.04 in 1974 has had a significant impact on this non-oil producing country. Costs of imported fuel for thermal electric plants jumped from $5.1 million in 1973 to $15.8 million in 1974. 7 Overall petroleum imports rose from $34.0 million in 1973 to $92.3 million the following year as quantities topped 6.8 million bbl - all supplied by Venezuela. 8 Substantial inflows of foreign exchange as a result of rising foreign investment, a rapidly expanding tourist industry, and
15
Energy planning in Guatemala
unusually high prices for the country's traditional exports of coffee, cotton, and sugar were not sufficient to offset the highly unfavourable balance of trade resulting from the need to import oil. This gave rise to a trade deficit of£123 million in 1974 and led to the decade's first decline in foreign reserves. 9 Consequently energy planning has now been given a high priority by the government.
Attempts at conservation
9 Balance o f Payments Yearbook, 1975, International Monetary Fund, Washington. 10 Consejo Nacional de Planificaci6n Econ6mica, op cit, Ref 4, p 3. 11 Calculated by the authors from public and private sources.
Like many nations, Guatemala's initial reaction to the escalation of international petroleum prices was to explore the possibilities of lowering imports. The government undertook several minor actions designed to lower oil consumption, many of which were similar to those taken by developed nations. These took the form of a temporary turning back of clocks, prohibition of outside decorative and commercial lighting, increased taxes and fees on high powered cars, and the closing of petrol stations on weekends. These efforts did not reduce the absolute demand for petroleum, although in 1974 the rate of increased demand was only 1.2%, against the 6.6% average annual growth rate of the 1964-1973 period? ° However, it is suspected that this decrease in energy growth rate is better associated with market mechanisms reacting to price increases than it is to the rather minimal conservation measures attempted by the government. Various factors are at work in Guatemala that hinder efforts to reduce petroleum consumption. End-use data for 1974 indicate that petroleum-based energy consumption was divided as follows: transport - 58%; industry - 37%; commercial/residential- 5%. ~ Guatemala has comparatively few private cars and the great bulk of the energy consumed in transport is attributable to trucks, buses and the national railroad system (Table 2). Given the lack of substitutibility for fuels in the transport sector and the increasing amount of goods and people that must be moved in an expanding economy, demand in this sector seems likely to continue to increase in the foreseeable future. In view of government policies geared to keep the nation on a path toward greater industrialization, energy demands in this sector will also rise. However, since much of the industrial consumption is in the form of electricity, there is an inherent potential for use of substitute energy sources, in particular hydro and geothermal power. Reposite in a growing population that consumes only 5-6% of the nation's commercial energy in commercial and residential use is a large potential for greatly increased energy consumption. This is particularly true given that non-commercial Table 2. Guatemala's petroleum consumption by type, 1974 (bbl)
(%)
Aviation fuels Petrol Paraffin Diesel Bunker 'C' Lubricants Asphalt
392 1 926 374 1 999 1 912 78 119
797 838 022 753 765 874 1 O0
Total
6 804 149
5.8 28.3 5-5 29.4 28.1 1-2 1.7
Source: Consejo Nacional de Planificaci6n Econbmica, Guatemala.
16
ENERGY POLICY March1978
Energy planning in Guatemala fuels are still tremendously important in rural Guatemala, where 65% of the population resides. In full realization that petroleum consumption cannot be reduced, at least in the short term, without extensive damage to the economy, the government has turned to longrange planning to deal with the nation's energy problems.
Long-range planning response Long-range energy planning consists of two major aspects: •
•
12 Instituto Nacional de Electrificaci6n, op cit, Ref6, pp 13-14. 13 Direcci6n General de Contabilidad del Estado, Liquidaci6n de/ Presupuesto de Ingresos y Egresos del Estado. 14 Direcci6n General de Obras POblicas, Unidad de Planeamiento y Programaci6n (unpublished data). is Consejo Nacional de Planificaci6n Econ6mica, op cit, Ref 4, p 1 1.
ENERGY
POLICY M a r c h 1 9 7 8
the development of the nation's vast geothermal and hydroelectric potential to reduce the 64% share (in 1974) of electric power generation held by petroleum-fired generating facilities; 12 the development of indigenous petroleum deposits to reduce the impact of petroleum imports on the country's balance of payments.
Electrical production Electricity consumption is continuing to escalate rapidly not only because of increased urban/industrial demand, but also owing to the government's policy of extending the power grid into rural areas where electrification is seen as a means of reducing devastating deforestation. The government commitment to electrification of the rural areas is evidenced by its capital investment programme. In 1973, the central government's contribution to the capital investment budget of the Instituto Nacional de Electrificaci6n (INDE) was £7.8 million, a figure which rose to $12.9 million in 1974. The following year, in spite of an 'austerity' budget in which total capital investment declined, the central government's contribution to INDE rose to $32.8 million, one third of the total national capital investment budget. ~3 Included in that sum was the financing necessary to continue a project involving the erection of 440 km of 69 kV transmission lines in the departments of Huehuetenango and Alta Verapaz (Figure 1). An additional 770 km of secondary lines from substations will bring electricity to 54 municipalities with a total population of 600000 by 1980. This maintains the rapid pace of electrification initiated between 1 July 1974 and 31 December 1975, when electrical service was introduced to, or expanded in, 44 municipalities. ~4 The need to immediately increase electrical production to satisfy expanding demands led the government to continue with its planned investment of $26 million between 1974 and 1976 to increase the production capacity of thermal power plants in Escuintla by 103 MW, thus bringing the generating capacity of the national system to nearly 320 MW. This is expected to prove adequate for domestic needs until longer term non-petroleum based projects commence operation. At the same time, the cost of and level of dependence upon petroleum for energy production will rise. The five-year plan for energy, 1975-1979, has projected an increase from 1.36 to 1.78 bbl of petroleum per capita for electrical production at a total cost of $139.9 million for the period.~5 This situation will change considerably by the early 1980s as longrange government efforts to reduce the role of petroleum in electrical production begin to take effect. With the completion of the necessary
17
Energy planning in Guatemala
GUATEMALA
A
A A I A
;:A ,,-";
"""
A gg ""- -
"'
\
GCH,XOY
~
-
ELECTRICITY PRODUCTION NATIONAL SYSTEM P/ANTS
TRANSMISSION LINES
• THERMO O HYDRO
- - EXISTING,1974 .... PLANNED,1975-79
MUNICIPAL or PRIVATE PLANTS
DEPARTMENT • BOUNDARIES '
A THERMO n HYDRO
Figure 1.
Development
@.O,UT,
of electricity
g e n e r a t i n g s y s t e m in G u a t e m a l a
16 INDE, Instituto Nacional de Electrificaci6n, Guatemala, 1975. 1~ Consejo Nacional de Planificaci6n Econ6mica, op cit, Ref 4, insert between pp 57 and 58. •is The project is based upon the considerable success of neighbouring El Salvador's Ahuachap&n facility. With a projected c o m p l e t i o n date of 1980, the M o y u t a project calls for the drilling of t w o wells near the M o y u t a Volcano and tapping of the resulting steam to p o w e r a turbine producing 3 0 M W .
18
planning procedures, direct government investment in three major non-petroleum energy projects began in 1976.16 These projects will add 4 2 0 M W to the national network capacity by 1982 at an expected cost of nearly $300 million, most of which is to be financed through the sale of bonds and loans from the Interamerican Development Bank and the World Bank. '7 The smallest of these three projects, both in terms of investment and scale, is the Moyuta project. Yet it holds considerable significance for Guatemala's energy future as the country's first effort at geothermal electricity production. '8 Cost estimates for the project approach $20 million. The project has added significance in that Guatemala has 35 similar sites suitable for geothermal development should this effort prove satisfactory. Significant as geothermal power may become, hydroelectric power has even greater potential. A 1974 study, performed with the
ENERGY
POLICY
March 1978
Energy planning in Guatemala
19The Aguacapa project, located in the Department of Santa Rose, will tap the Aguacapa River by way of investment of more than $ 6 0 million. The three turbines to be installed at the facility will add 90 MW to the electrical network in 1978, raising the generating capacity of the national system to 4 1 0 MW. By far the most ambitious project in Guatemala's history is the Chixoy project. An investment of $ 2 0 0 million in the harnessing of the upper Chixoy River basin will add 3 0 0 MW to the national network with completion of the initial stage by 1982. Construction of the 105 x 4 5 0 m dam between 1976 and 1980 is expected to create employment for an average of 1 5 0 0 labourers in this area of minimal previous development investment, and to create a lake containing 4 5 5 million m 3 of water. The dam, now under construction near Pueblo Viejo, will channel water through a 25 km tunnel of 5 m tubing to the generating plant at Quixal, which will house the five turbines involved in electricity generation. A 3 0 0 MW transmission line will connect the Quixal plant over 1 2 3 k m to Guatemala City. Additional plans call for the further development of the upper reaches of the river through three smaller projects between 1982 and 1995 which will make an additional 3 2 0 MW available to the power system. 2o For example, as an adjunct to official policies surrounding import substitution in the early 1960s, the government required the building of a refinery on the Caribbean coast for the processing of products to be sold within the country. Built to serve only the limited Guatemalan market, the refinery was too small to be economic, and even with reduced size frequently did not operate up to capacity. The result was higher product prices for consumers and less profit for investors, while the country saved minimal amounts in foreign exchange and gained a handful of refinery-oriented jobs. This refinery, a victim of the energy crisis, ceased operation in the spring of 1975. 21 Direcci6n General de Mineria e Hidrocarburos (unpublished data). 22 In view of the oil's high sulphur content and the logistics problems involved in moving it from Rubelsanto to the country's only functioning refinery at Escuintla on the Pacific coastal plain (which was exclusively designed to process Venezuelan reconstituted crude), this seems to be the most sensible marketing procedure. 23Decreto 96-75, 'Ley de R6gimen Petrolero de la Naci6n', Diario de Centroamerica, 22 December 1975, pp 1377-78.
ENERGY
POLICY
March 1 9 7 8
assistance of West German technicians, found Guatemala rich in hydroelectric potential with 240 sites capable of generating 5000 MW. Of this potential, only 2% had been developed - so development of its hydroelectrical resources is a principal facet of long-range energy planning. At present two major hydroelectric projects are underway, t9 Oil self-suJficiency The second element of the government's long-range energy programme involves development of indigenous petroleum resources. Suggestions of supposedly vast oil resources in northern Guatemala have circulated for decades. Some concessions for oil exploration were granted in the 1950s, but no serious efforts at exploration were made until 1973. Before then oil was too cheap and too plentiful elsewhere. There were also other disincentives for foreign investment, especially involving political violence and instability. Moreover, government policies were not always positive or rational. 2° Finally there is the matter of infrastructure. Suspected petroleum deposits were located in remote and sparsely settled northern Guatemala, an area almost totally lacking all-weather roads and with no direct outlet to the sea. The rugged topography of certain areas, combined with the dense vegetation and a transportation network consisting of horse trails and rivers, discouraged the costly investments necessary to search for oil. In the 1970s, several changes have occurred to spur exploration and development. Initially, the discovery of large petroleum deposits in the nearby Reforma field of Mexico led the Shenandoah Oil Company to begin test drilling in its Guatemalan concession in 1973. Although the first efforts proved fruitless, in 1974, motivated by a series of leaps in international oil prices, the company shifted the focus of its activity 40 km to the east of the original drilling site, relocating in the northern Alta Verapaz department. By the end of 1976, four of the first five test wells had struck oil and production potential stood at 30 000 bbl per day - hardly wealth on the scale of Venezuela or Saudi Arabia, but still significant in a country importing all its daily consumption of 22 000 bbl of petroleum and petroleum products. 2~ Current plans call for expanded exploration efforts as well as the construction of a pipeline from Shenandoah's Rubelsanto field to Livingston on the Caribbean coast from which the oil will be exported for refining and marketing. 22 In addition to the incentives provided by proven discoveries in the region and by international oil prices, foreign investment has been encouraged by recent changes in petroleum legislation and policies designed to establish a stable and clear government position on foreign investment for oil exploration and exploitation. Moreover, the time period of concessions to oil companies has been reduced so that investors may no longer 'sit' on their concessions for decades without seeking to develop them. 23 Conclusion Long-range energy planning was forced on the government of Guatemala by rapid escalation in the cost of imported petroleum during the 1973-74 period. That planning has as its principal elements
19
Energy planning in Guatemala
the development of indigenous energy resources and the diversification of energy sources. The availability of vast potential in terms of geothermal and hydroelectric energy, when combined with the 'worst case' availability of some domestic petroleum supplies, make two points clear. First, Guatemala's growing demands for energy in the future will largely be satisfied through the exploitation of domestic resources. Dependence on imported petroleum for electrical production will decline sharply after the early 1980s. Second, the possibility of oil wealth in northern Guatemala is likely to lead to the breaking of the area's isolation and an end to the benign neglect attitude of past governments toward the region, which should involve the north more closely with the national fabric. The economic 'crunch' following the 1973-74 energy crisis may prove beneficial to Guatemala's development over the long term.
20
ENERGY POLICY March 1978
Allan K. Fitzsimmons and Terry L. Melntosh
Heavy economic burdens associated with rapidly escalating costs of imported petroleum have forced Guatemala's government to formulate and i m p l e m e n t a new energy policy, which recognizes the high degree of dependence on foreign oil for commercial energy as well as the need to include social and environmental factors in policy formulation. The government has presented a programme that depends on fuel diversification and the development of indigenous energy sources to provide a longterm solution, while recognizing that increased import costs are necessary over the short term. Professor Fitzsimmons is with the Department of Geography and Regional Science, The George Washington University, Washington, DC 2 0 0 5 2 ; Professor Mcliqtosh is with the Department of Geography, University of Kentucky, USA. Research for information contained in this article was sponsored by a grant from the National Science Foundation (USA). 1World
Energy Supplies,
1950-1974,
United Nations, Department of Economic and Social Affairs, New York, 1976 (especially Table 2). aEfrain Friedman, 'Financing energy in developing countries', Energy Policy, Vol 4, No 1, March 1976, pp 37-49, 3Thomas T. Veblin, 'The urgent need for continued on p 15
14
Like developed nations, developing countries require ever increasing amounts of commercial energy to fuel national economies. Indeed, owing to industrial expansion, mechanization of transport, growing populations, and the increased use of technology in agricultural sectors, the rate of increase of developing countries' consumption of commercial energy has outpaced that of developed countries since 1950. t For most developing countries the bulk of this demand has been met by petroleum imports. Consequently, when international petroleum prices quadrupled during 1973-74, severe strains were placed on the national economies of many less developed countries. 2 These pressures forced many governments to give new priority to often neglected energy planning. Our purpose here is to examine the energy background of Guatemala and the long-term response of the government in efforts aimed at satisfying increasing demands while also reducing national dependence on costly energy-related imports. Until recently, Guatemala's energy base was dominated by noncommercial fuels (Table 1). Chief among such fuels is wood, which has long been the principal fuel of the rural population. Deforestation, attributable to the use of fuel wood, has led serious environmental and economic consequences brought on by extensive erosion and gullying, which is accompanied by reduced agricultural productivity on hillsides and valley bottoms. Such problems are particularly acute in the densely populated western highlands where a 1964 study indicated that wood supplied 85% of residential fuel. 3 The leap in petroleum prices in 1973-74 raised justifiable concern over the future of the limited forest lands remaining in the region, and the environmental and economic impact of continued or accelerated use of fuel wood) On the Pacific coastal plain, with its numerous exportoriented agricultural estates, sugar cane pulp is another important non-commercial fuel, especially in the operation of the area's sugar cane processing plants. However, the shift to commercial fuels, while far from complete, is well underway and the traditional fuels' share of the total energy base will continue to diminish. Between 1950 and 1974, annual consumption of commercial
ENERGY POLICY March 1978
Energy planning in Guatemala Table 1. Guatemala's consumption of energy by origin for selected years (%) Energy source
1950
1955
1960
1965
1970
1974
Vegetal (wood, sugar pulp) Hydro Thermo
63.0 3.2 33.8
59.9 3.7 36.4
55.0 3.7 41.3
51.9 2.3 45.8
50.6 6.5 42.9
45.8 5.1 49.1
Source: Consejo Nacional de Planificacibn Econ6mica, Guatemala.
con tinGe d from 1) 14 forest conservation in highland Guatemala', Biological Conservation, Vol 9, 1976, pp 141-154. 4plan de Desarrollo 1975/79: Politicas de Desarrollo de/Sector Energia, Consejo Nacional de Planificaci6n Econ6mica, Guatemala, July 1975, p 2. 5 Peter Odell, Oil and World Power: Background to the Energy Crisis, Penguin, Harmondsworth, UK, 1974, 3 ed, especially Chapters 2, 7, 8 and 9. 6 Informe Estadistico, 1974, Instituto Nacional de Electrificaci6n, Guatemala, 1975, p 13. 7 Consejo Nacional de Planificaci6n Econ6mica, op cit, Ref 4, p 13. 8 Direcci6n General de Estadistica, Importaciones: Partida-Paiz. Energy imports are listed under category 300 of the NAUCA code.
ENERGY POLICY March1978
energy increased from 0.3 million tonnes coal equivalent (mtce) to 1.43 mtce, while per capita consumption rose from 106 to 256 kg of coal equivalent during the same period? Demand for electrical energy rose on average by 12% annually between 1965 and 1974. 4 These increases were associated with government policies designed to increase industrialization through import substitution, extend the nation's electrical power grid, and expand the national truck fleet and road network. Interwoven with these factors is the influence of a growing population which increased from slightly less than 4 million in 1960 to more than 6 million in 1976. International petroleum exploration and development during the 1950s and 1960s made available cheap imported petroleum for world buyers? Ready access to this versatile and easily handled fuel prompted governments to forego development of indigenous energy industries in many countries where such industries were not price competitive or protected by government policies - witness the collieries of Western Europe. In Guatemala, suspected petroleum deposits were not of sufficient size to attract the extensive foreign investment and technology required for their development during the 1950s and 1960s. During this period there also was already an excess of supply over demand on world markets, and no incentive for development of new sources in untried regions. Finally, Guatemala's domestic market for energy was too small to serve as an investment stimulus. Faced with a rapid increase in demand for commercial energy, the government could seek to develop indigenous resources on its own or turn to imports. Lack of internal expertise necessary to develop either suspected petroleum deposits or domestic hydroelectric potential, combined with the high cost of such efforts, and the pressing needs for capital investment in such other fields as transport, health, and education, made the government opt for cheap imported petroleum. Such reliance became almost total - i n 1974 imported petroleum provided 97% of the commercial energy consumed, j At present Guatemala is totally dependent on imports to fuel its mechanized transport system, thermal industrial requirements, and for over half of its electrical energy. 6 When oil was $3 per barrel the policy of import dependence was easily justifiable, but with costs now exceeding $12 per barrel such a policy has become a major economic liability. The quadrupling of oil prices from an average of $3.21 per barrel in 1972 to $12.04 in 1974 has had a significant impact on this non-oil producing country. Costs of imported fuel for thermal electric plants jumped from $5.1 million in 1973 to $15.8 million in 1974. 7 Overall petroleum imports rose from $34.0 million in 1973 to $92.3 million the following year as quantities topped 6.8 million bbl - all supplied by Venezuela. 8 Substantial inflows of foreign exchange as a result of rising foreign investment, a rapidly expanding tourist industry, and
15
Energy planning in Guatemala
unusually high prices for the country's traditional exports of coffee, cotton, and sugar were not sufficient to offset the highly unfavourable balance of trade resulting from the need to import oil. This gave rise to a trade deficit of£123 million in 1974 and led to the decade's first decline in foreign reserves. 9 Consequently energy planning has now been given a high priority by the government.
Attempts at conservation
9 Balance o f Payments Yearbook, 1975, International Monetary Fund, Washington. 10 Consejo Nacional de Planificaci6n Econ6mica, op cit, Ref 4, p 3. 11 Calculated by the authors from public and private sources.
Like many nations, Guatemala's initial reaction to the escalation of international petroleum prices was to explore the possibilities of lowering imports. The government undertook several minor actions designed to lower oil consumption, many of which were similar to those taken by developed nations. These took the form of a temporary turning back of clocks, prohibition of outside decorative and commercial lighting, increased taxes and fees on high powered cars, and the closing of petrol stations on weekends. These efforts did not reduce the absolute demand for petroleum, although in 1974 the rate of increased demand was only 1.2%, against the 6.6% average annual growth rate of the 1964-1973 period? ° However, it is suspected that this decrease in energy growth rate is better associated with market mechanisms reacting to price increases than it is to the rather minimal conservation measures attempted by the government. Various factors are at work in Guatemala that hinder efforts to reduce petroleum consumption. End-use data for 1974 indicate that petroleum-based energy consumption was divided as follows: transport - 58%; industry - 37%; commercial/residential- 5%. ~ Guatemala has comparatively few private cars and the great bulk of the energy consumed in transport is attributable to trucks, buses and the national railroad system (Table 2). Given the lack of substitutibility for fuels in the transport sector and the increasing amount of goods and people that must be moved in an expanding economy, demand in this sector seems likely to continue to increase in the foreseeable future. In view of government policies geared to keep the nation on a path toward greater industrialization, energy demands in this sector will also rise. However, since much of the industrial consumption is in the form of electricity, there is an inherent potential for use of substitute energy sources, in particular hydro and geothermal power. Reposite in a growing population that consumes only 5-6% of the nation's commercial energy in commercial and residential use is a large potential for greatly increased energy consumption. This is particularly true given that non-commercial Table 2. Guatemala's petroleum consumption by type, 1974 (bbl)
(%)
Aviation fuels Petrol Paraffin Diesel Bunker 'C' Lubricants Asphalt
392 1 926 374 1 999 1 912 78 119
797 838 022 753 765 874 1 O0
Total
6 804 149
5.8 28.3 5-5 29.4 28.1 1-2 1.7
Source: Consejo Nacional de Planificaci6n Econbmica, Guatemala.
16
ENERGY POLICY March1978
Energy planning in Guatemala fuels are still tremendously important in rural Guatemala, where 65% of the population resides. In full realization that petroleum consumption cannot be reduced, at least in the short term, without extensive damage to the economy, the government has turned to longrange planning to deal with the nation's energy problems.
Long-range planning response Long-range energy planning consists of two major aspects: •
•
12 Instituto Nacional de Electrificaci6n, op cit, Ref6, pp 13-14. 13 Direcci6n General de Contabilidad del Estado, Liquidaci6n de/ Presupuesto de Ingresos y Egresos del Estado. 14 Direcci6n General de Obras POblicas, Unidad de Planeamiento y Programaci6n (unpublished data). is Consejo Nacional de Planificaci6n Econ6mica, op cit, Ref 4, p 1 1.
ENERGY
POLICY M a r c h 1 9 7 8
the development of the nation's vast geothermal and hydroelectric potential to reduce the 64% share (in 1974) of electric power generation held by petroleum-fired generating facilities; 12 the development of indigenous petroleum deposits to reduce the impact of petroleum imports on the country's balance of payments.
Electrical production Electricity consumption is continuing to escalate rapidly not only because of increased urban/industrial demand, but also owing to the government's policy of extending the power grid into rural areas where electrification is seen as a means of reducing devastating deforestation. The government commitment to electrification of the rural areas is evidenced by its capital investment programme. In 1973, the central government's contribution to the capital investment budget of the Instituto Nacional de Electrificaci6n (INDE) was £7.8 million, a figure which rose to $12.9 million in 1974. The following year, in spite of an 'austerity' budget in which total capital investment declined, the central government's contribution to INDE rose to $32.8 million, one third of the total national capital investment budget. ~3 Included in that sum was the financing necessary to continue a project involving the erection of 440 km of 69 kV transmission lines in the departments of Huehuetenango and Alta Verapaz (Figure 1). An additional 770 km of secondary lines from substations will bring electricity to 54 municipalities with a total population of 600000 by 1980. This maintains the rapid pace of electrification initiated between 1 July 1974 and 31 December 1975, when electrical service was introduced to, or expanded in, 44 municipalities. ~4 The need to immediately increase electrical production to satisfy expanding demands led the government to continue with its planned investment of $26 million between 1974 and 1976 to increase the production capacity of thermal power plants in Escuintla by 103 MW, thus bringing the generating capacity of the national system to nearly 320 MW. This is expected to prove adequate for domestic needs until longer term non-petroleum based projects commence operation. At the same time, the cost of and level of dependence upon petroleum for energy production will rise. The five-year plan for energy, 1975-1979, has projected an increase from 1.36 to 1.78 bbl of petroleum per capita for electrical production at a total cost of $139.9 million for the period.~5 This situation will change considerably by the early 1980s as longrange government efforts to reduce the role of petroleum in electrical production begin to take effect. With the completion of the necessary
17
Energy planning in Guatemala
GUATEMALA
A
A A I A
;:A ,,-";
"""
A gg ""- -
"'
\
GCH,XOY
~
-
ELECTRICITY PRODUCTION NATIONAL SYSTEM P/ANTS
TRANSMISSION LINES
• THERMO O HYDRO
- - EXISTING,1974 .... PLANNED,1975-79
MUNICIPAL or PRIVATE PLANTS
DEPARTMENT • BOUNDARIES '
A THERMO n HYDRO
Figure 1.
Development
@.O,UT,
of electricity
g e n e r a t i n g s y s t e m in G u a t e m a l a
16 INDE, Instituto Nacional de Electrificaci6n, Guatemala, 1975. 1~ Consejo Nacional de Planificaci6n Econ6mica, op cit, Ref 4, insert between pp 57 and 58. •is The project is based upon the considerable success of neighbouring El Salvador's Ahuachap&n facility. With a projected c o m p l e t i o n date of 1980, the M o y u t a project calls for the drilling of t w o wells near the M o y u t a Volcano and tapping of the resulting steam to p o w e r a turbine producing 3 0 M W .
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planning procedures, direct government investment in three major non-petroleum energy projects began in 1976.16 These projects will add 4 2 0 M W to the national network capacity by 1982 at an expected cost of nearly $300 million, most of which is to be financed through the sale of bonds and loans from the Interamerican Development Bank and the World Bank. '7 The smallest of these three projects, both in terms of investment and scale, is the Moyuta project. Yet it holds considerable significance for Guatemala's energy future as the country's first effort at geothermal electricity production. '8 Cost estimates for the project approach $20 million. The project has added significance in that Guatemala has 35 similar sites suitable for geothermal development should this effort prove satisfactory. Significant as geothermal power may become, hydroelectric power has even greater potential. A 1974 study, performed with the
ENERGY
POLICY
March 1978
Energy planning in Guatemala
19The Aguacapa project, located in the Department of Santa Rose, will tap the Aguacapa River by way of investment of more than $ 6 0 million. The three turbines to be installed at the facility will add 90 MW to the electrical network in 1978, raising the generating capacity of the national system to 4 1 0 MW. By far the most ambitious project in Guatemala's history is the Chixoy project. An investment of $ 2 0 0 million in the harnessing of the upper Chixoy River basin will add 3 0 0 MW to the national network with completion of the initial stage by 1982. Construction of the 105 x 4 5 0 m dam between 1976 and 1980 is expected to create employment for an average of 1 5 0 0 labourers in this area of minimal previous development investment, and to create a lake containing 4 5 5 million m 3 of water. The dam, now under construction near Pueblo Viejo, will channel water through a 25 km tunnel of 5 m tubing to the generating plant at Quixal, which will house the five turbines involved in electricity generation. A 3 0 0 MW transmission line will connect the Quixal plant over 1 2 3 k m to Guatemala City. Additional plans call for the further development of the upper reaches of the river through three smaller projects between 1982 and 1995 which will make an additional 3 2 0 MW available to the power system. 2o For example, as an adjunct to official policies surrounding import substitution in the early 1960s, the government required the building of a refinery on the Caribbean coast for the processing of products to be sold within the country. Built to serve only the limited Guatemalan market, the refinery was too small to be economic, and even with reduced size frequently did not operate up to capacity. The result was higher product prices for consumers and less profit for investors, while the country saved minimal amounts in foreign exchange and gained a handful of refinery-oriented jobs. This refinery, a victim of the energy crisis, ceased operation in the spring of 1975. 21 Direcci6n General de Mineria e Hidrocarburos (unpublished data). 22 In view of the oil's high sulphur content and the logistics problems involved in moving it from Rubelsanto to the country's only functioning refinery at Escuintla on the Pacific coastal plain (which was exclusively designed to process Venezuelan reconstituted crude), this seems to be the most sensible marketing procedure. 23Decreto 96-75, 'Ley de R6gimen Petrolero de la Naci6n', Diario de Centroamerica, 22 December 1975, pp 1377-78.
ENERGY
POLICY
March 1 9 7 8
assistance of West German technicians, found Guatemala rich in hydroelectric potential with 240 sites capable of generating 5000 MW. Of this potential, only 2% had been developed - so development of its hydroelectrical resources is a principal facet of long-range energy planning. At present two major hydroelectric projects are underway, t9 Oil self-suJficiency The second element of the government's long-range energy programme involves development of indigenous petroleum resources. Suggestions of supposedly vast oil resources in northern Guatemala have circulated for decades. Some concessions for oil exploration were granted in the 1950s, but no serious efforts at exploration were made until 1973. Before then oil was too cheap and too plentiful elsewhere. There were also other disincentives for foreign investment, especially involving political violence and instability. Moreover, government policies were not always positive or rational. 2° Finally there is the matter of infrastructure. Suspected petroleum deposits were located in remote and sparsely settled northern Guatemala, an area almost totally lacking all-weather roads and with no direct outlet to the sea. The rugged topography of certain areas, combined with the dense vegetation and a transportation network consisting of horse trails and rivers, discouraged the costly investments necessary to search for oil. In the 1970s, several changes have occurred to spur exploration and development. Initially, the discovery of large petroleum deposits in the nearby Reforma field of Mexico led the Shenandoah Oil Company to begin test drilling in its Guatemalan concession in 1973. Although the first efforts proved fruitless, in 1974, motivated by a series of leaps in international oil prices, the company shifted the focus of its activity 40 km to the east of the original drilling site, relocating in the northern Alta Verapaz department. By the end of 1976, four of the first five test wells had struck oil and production potential stood at 30 000 bbl per day - hardly wealth on the scale of Venezuela or Saudi Arabia, but still significant in a country importing all its daily consumption of 22 000 bbl of petroleum and petroleum products. 2~ Current plans call for expanded exploration efforts as well as the construction of a pipeline from Shenandoah's Rubelsanto field to Livingston on the Caribbean coast from which the oil will be exported for refining and marketing. 22 In addition to the incentives provided by proven discoveries in the region and by international oil prices, foreign investment has been encouraged by recent changes in petroleum legislation and policies designed to establish a stable and clear government position on foreign investment for oil exploration and exploitation. Moreover, the time period of concessions to oil companies has been reduced so that investors may no longer 'sit' on their concessions for decades without seeking to develop them. 23 Conclusion Long-range energy planning was forced on the government of Guatemala by rapid escalation in the cost of imported petroleum during the 1973-74 period. That planning has as its principal elements
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Energy planning in Guatemala
the development of indigenous energy resources and the diversification of energy sources. The availability of vast potential in terms of geothermal and hydroelectric energy, when combined with the 'worst case' availability of some domestic petroleum supplies, make two points clear. First, Guatemala's growing demands for energy in the future will largely be satisfied through the exploitation of domestic resources. Dependence on imported petroleum for electrical production will decline sharply after the early 1980s. Second, the possibility of oil wealth in northern Guatemala is likely to lead to the breaking of the area's isolation and an end to the benign neglect attitude of past governments toward the region, which should involve the north more closely with the national fabric. The economic 'crunch' following the 1973-74 energy crisis may prove beneficial to Guatemala's development over the long term.
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ENERGY POLICY March 1978