Emerging LNG paradigm in Latin America: Promise and uncertainty

To understand the economic landscape of a region like Latin America, it is essential to highlight that one of its most substantial sectors is the Liquefied Natural Gas (LNG) market. This market presents a complex scenario of opportunities and challenges, where the promise of energy security clashes with persistent economic and operational realities. Far from being a homogeneous actor or merely the region south of the United States, Latin America displays unique dynamics that demand a reevaluation of traditional strategies.

While early projections pointed to steady growth driven by the need to diversify the energy matrix, the reality shows a regasification capacity that is four times higher than its liquefaction capacity, positioning Latin America as a net importer of LNG (Poten and Partners, n.d.). This structural dependency is shaped by specific regional market factors, prompting a current debate on its true sustainability and energy autonomy. LNG, therefore, emerges as a middle ground between energy security and sustainability.

Growing demand and limited energy autonomy

The International Energy Agency (IEA, 2024) highlights in one of its reports that regional natural gas consumption increased by 18% over the last decade, particularly in the industrial and electricity sectors. As a whole, Latin America remains a net LNG importer, which is problematic when considering its regasification capacity (57 MTPA) compared to its liquefaction capacity (13 MTPA). This gap creates dependency, particularly visible in countries like Brazil and Chile.

Take Brazil, for example: the southern giant has nine regasification terminals but must import LNG to compensate for hydroelectric production deficits caused by prolonged droughts. According to the IEA (2022), in 2021 Brazil imported 23% more LNG than the previous year due to water shortages.

Argentina deserves a special mention. It is attempting to capitalize on the Vaca Muerta shale formation through timely policies and initiatives to become a net exporter by 2027. YPF is investing in Punta Colorada, Río Negro. Initially planned as a liquefaction plant in Bahía Blanca with an estimated investment of $6 billion, the project had to be relocated due to a lack of financing partners. Instead of a plant, the new plan is to deploy liquefaction vessels as an investment alternative.

Small-Scale LNG: A regional adaptive response

Despite these challenges, small-scale LNG (SSLNG) distribution has gained traction due to its flexibility. In countries like Peru, Colombia, and Panama, gas is transported via trucks or barges to isolated communities and industries, providing access to cleaner energy.

The Development Bank of Latin America (CAF, 2023) confirms that there are at least 18 small-scale LNG projects underway in various countries to facilitate transportation and power generation in remote areas. This approach presents a promising medium-term solution for efficiently producing LNG.

The model has allowed for the monetization of gas resources in remote locations and has expanded the customer base to previously unreachable areas. The most fascinating aspect of this approach is its flexibility, which enables higher prices for natural gas and access to new consumers.

However, this flexibility comes with limitations: smaller volumes, price-sensitive customers, and a general reluctance toward long-term contracts, which in Latin America rarely exceed two or three years—unlike the decades-long agreements typical in Asian markets.

Innovation and foreign investment in Liquefied Natural Gas

Shell, TotalEnergies, and New Fortress Energy are among the companies investing in mobile terminals and modular solutions. When multinational corporations commit to large investments, it’s clear that the business case is strong.

A prime example is New Fortress Energy’s project in Altamira, Mexico—the first floating liquefaction unit in Latin America, capable of exporting 2.8 MTPA (NFE, 2023). This project could generate up to $25 billion over the next five years, especially if export routes to Europe and Asia solidify.

However, a key structural challenge for LNG in Latin America is the reluctance to sign long-term contracts. While 20-year agreements are common in Asia, contracts in Latin America typically span 2 to 5 years, complicating infrastructure financing since banks demand long-term guarantees for high-risk investments. 

Spot prices and buyer sensitivity

Spot price volatility adds another layer of complexity. From a low of $4.10 per MMBTU in Mexico in 2019, prices surged to $37/MMBTU in Argentina in 2021 due to the European energy crisis. In 2023, prices fluctuated between $10 and $15, affecting project budgeting and market profitability.

The rising liquefaction tariffs in the U.S. (above $2.50) due to inflation and labor shortages, coupled with price variations linked to Brent Crude Oil, highlight the region’s vulnerability to external factors and the need for a more robust pricing strategy.

This scenario forces countries to develop hedging strategies, but few Latin American economies have the technical or institutional capacity to implement them effectively.

Table 1: Historical Spot LNG Prices in Latin America (MMBTU)

Year	Country	Minimum Price ($)	Maximum Price ($)	Comments
2019	Mexico	4.10	–	Lowest recorded price in the region.
2021	Argentina	–	37.00	Influenced by high demand and EU prices.
Current	Regional	12.00	14.00	Current spot prices for most buyers.

Note: Data from the webinar “LNG Markets in Latin America and the Caribbean: 2025,” Sergio Chapa, Poten and Partners (n.d.).

In other words, regional competition for gas molecules is intensifying. The relocation of industries, the growth of data centers, and the overall rise in energy demand exert internal pressure that competes with exports. This is compounded by macroeconomic challenges like inflation, skilled labor shortages, and climate phenomena like droughts, which can escalate LNG import needs for power generation. Contractual risk remains a significant barrier, as buyers are often unwilling to commit to long-term agreements.

Regional economic impact: Benefits and risks

The economic impact of LNG brings both benefits and risks. On the benefits side, energy cost reductions are notable, particularly in areas without pipeline access—LNG can lower costs by up to 30% compared to diesel (CAF, 2023).

Job creation is another benefit: each SSLNG project is estimated to generate 500 direct jobs and 1,200 indirect jobs during the construction phase. Additionally, LNG is considered a transitional energy source, making it eligible for climate financing under ESG criteria.

However, the risks include high exposure to external shocks. U.S. inflation, the war in Ukraine, and tensions in the South China Sea all influence LNG prices. Another downside is underutilized overcapacity—terminals with utilization rates below 25% are idle assets that burden public and private budgets.

LNG Terminals in Latin America and the Caribbean 

Source: Regional Association of Oil, Gas, and Biofuels Sector Companies in Latin America and the Caribbean, April 2016

Contribution to global trade and supply chains

Latin America has the potential to become a key supplier to Europe, especially as Russian supply diminishes. According to BloombergNEF (2024), the region could supply up to 8% of Europe’s LNG imports by 2030.

This is encouraging news, particularly for countries like Argentina, Mexico, and Trinidad and Tobago, which could become strategic nodes in global energy trade.

Additionally, the development of logistical chains, such as transporting LNG in ISO containers, will stimulate economic integration and facilitate the export of technical expertise and technological solutions.

Sustainability: Between transition and contradiction

We must acknowledge that LNG emits less CO₂ than coal or oil, yet it remains a fossil fuel. The UN and World Bank have explicitly warned that any expansion of LNG projects should be transitional. LNG’s flexibility makes it an asset for projects involving carbon capture, positioning it as an essential piece in the energy transition puzzle (IEA, 2024).

Projections 2025–2035: Resilience or dependence?

Looking ahead, the outlook for LNG in Latin America is shaped by at least five factors:

1. The growth of SSLNG in secondary markets.
2. The transition from importers to exporters in countries like Argentina and Mexico.
3. Increasing competition for gas molecules, particularly during droughts.
4. Rising investments in modular infrastructure that reduce CAPEX and implementation time.
5. The emergence of regional agreements to coordinate prices, contracts, and energy security.

Conclusions

In conclusion, Latin America faces a crossroads: it can either leverage LNG as a driver of integration and energy resilience or fall into volatile dependency that limits development.

The ability to forge public-private partnerships, diversify LNG applications, and design policies that balance energy security with sustainability will be key to transforming production scenarios and infrastructure into export capacities—provided that projects in Mexico and Argentina achieve FID.

For now, Brazil will remain the largest importer due to its industrial and energy demand. The ongoing challenge is contractual risk, as long-term agreements remain elusive. The future of LNG in the region is unwritten, but its imprint on the global economy is inevitable.

References

1. International Energy Agency (IEA). (2022). Brazil 2022 Energy Policy Review. https://www.iea.org/reports/brazil-2022
2. International Energy Agency (IEA). (2024). World Energy Outlook 2024. https://www.iea.org/reports/world-energy-outlook-2024
3. Development Bank of Latin America (CAF). (2023). Energy Outlook for Latin America. https://www.caf.com
4. BloombergNEF. (2024). Global LNG Outlook 2024–2030. https://about.bnef.com
5. New Fortress Energy (NFE). (2023). Altamira FLNG Project Overview. https://www.newfortressenergy.com
6. Poten and Partners. (n.d.). LNG Markets in Latin America and the Caribbean: 2025.
7. YPF. (2024). Vaca Muerta Development Plan 2024–2030. https://www.ypf.com