Energy a priority for Uruguay’s new government

Market: Crude oil, Electricity, Hydrogen, Natural gas
28/02/25

Energy will play a central role as Uruguay's new president Yamandu Orsi begins his five-year term on 1 March.

Orsi, of the left-wing Broad Front coalition, takes over one of South America's most economically and politically stable countries. The economy is forecast to expand by 3pc this year, above the regional average, and the government wants to attract investment to maintain growth. The energy sector is a priority.

Uruguay already has one of the region's cleanest grids, with 99pc of power coming from renewable sources, and in February reached the goal of 100pc electrification nationwide, according to the state-run electric company, UTE.

The Orsi administration is studying options for the second phase of the energy transition, which includes adding capacity to meet increasing demand from electrification of transportation and clean fuel production.

New finance minister Gabriel Oddone said the administration would focus on reducing red tape and potentially provide incentives for investment in the energy sector.

Uruguay currently has close to 5.3GW of installed capacity, with 78pc in renewable sources, for its population of 3.5mn.

The UTE, which had a profit of $315mn in 2024, is adding 100MW in wind power in the next two years. The Orsi administration plans to prioritize solar capacity.

The new government is keenly following the development of low-carbon hydrogen and e-fuel projects.

The most advanced project is for production of 700,000 tonnes (t) of synthetic fuel by Chile's HIF Global and ALUR, the biofuel arm of the state-owned Ancap. Investment is estimated at $6bn, making it the largest planned single investment in the country's history.

The company requested approval in January of environmental permits for the project's solar park that would include 1.84mn bifacial solar panels. It would produce a peak of 1,162MW. Construction would take 18 months from approval.

The municipal council in Paysandu, in northwestern Uruguay where the project is planned, on 27 February approved a change in land use to facilitate plant construction.

Ancap, which lost an estimated $130mn last year because its only refinery was closed for six months, has proposed offshore production of low-carbon hydrogen. The Orsi administration has not yet committed to the project.

Reverse transition?

The new government will also have to also have to decide on the future of seven offshore exploration blocks, with seismic testing planned for late this year, and the possible construction of a gas pipeline that would link Argentina and Brazil.

A pipeline exists from Argentina to Uruguay, but it could be expanded and extended to supply southern Brazil. It would require an additional 415km (258mi) in Uruguay, and around 500km in Brazil's Rio Grande do Sul state.

Orsi has taken a wait-and-see attitude toward exploration, while a gas pipeline would likely have more popular support because it could expand service from only a section of the coast to a wider region.

By Lucien Chauvin

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