Uruguay, long known for its ambitious renewable energy agenda, has taken a significant new step in its evolving energy landscape. This week, the country’s state-owned electricity company, UTE, announced that it has begun importing natural gas from Argentina’s vast Vaca Muerta formation—a move that has already saved the utility around US$3 million in just the first seven days of operation, according to UTE President Andrea Cabrera. This milestone comes after two decades of logistical groundwork and patient diplomacy, finally allowing Uruguay to tap into Argentina’s Neuquén province reserves via the Gasoducto Cruz del Sur pipeline.
The primary recipient of this new energy flow is the Punta del Tigre combined-cycle power plant in San José. There, the facility is now partially replacing expensive diesel with cost-effective Argentine natural gas. In the initial phase of the agreement, UTE consumed 7.5 million cubic meters of gas, a figure that underscores the scale of the shift. "This was an energy source we always aimed to have, but the opportunity hadn't materialized until now," Cabrera explained, reflecting on the long wait for the supply line to become active.
The agreement, at least for now, is set for a one-year term with options to renew. However, it is structured as an interruptible contract, meaning that Argentine domestic demand could take priority if supplies tighten. As Uruguay braces for a predicted dry summer—a season expected to drive up electricity demand due to air conditioning use—the gas supply serves as a crucial buffer for thermal generation during peak periods. UTE’s approach is pragmatic: natural gas will not displace renewable sources like wind or solar, but will be used according to a real-time economic equation that weighs market prices and operational needs.
Beyond the immediate financial savings, there are broader operational and environmental benefits. Running turbines on natural gas reduces water consumption and slows mechanical wear and tear, which in turn delays the need for costly large-scale reinvestment in machinery maintenance. Natural gas is also considered a cleaner alternative to diesel, aligning with UTE’s stated goals to lessen the environmental impact of its thermal backup fleet. The activation of the supply line puts an end to a 20-year period during which Uruguay paid maintenance costs for a largely idle pipeline, finally transforming a long-standing overhead into a strategic asset.
According to UTE, the successful integration of Vaca Muerta gas positions the company to better manage the fiscal volatility that comes with international oil prices and regional climate fluctuations. In a region where weather can swing dramatically and energy markets are often unpredictable, this new flexibility is no small feat. It also dovetails with broader trends across Latin America, where the energy sector is undergoing rapid transformation.
In fact, Uruguay’s move arrives at a time when Latin America as a whole is making headlines for its clean energy leadership. According to a recent report by Chubb, a global insurance giant, renewable sources accounted for a whopping 62% of the region’s electricity generation in 2023—well above the global average of 30%. The region’s expansion of wind, solar, and hydroelectric capacity has attracted major investments, with projects in Brazil, Chile, Mexico, and Uruguay alone representing more than US$19 billion and thousands of megawatts of installed capacity.
This accelerating transition, however, comes with its own set of challenges. Chubb’s report, The Energy Future of Latin America: An Insured Transition, points out that as renewable projects grow in size and complexity, exposure to market volatility, extreme weather events, and financing hurdles is also on the rise. To address these risks, Chubb has expanded its insurance offerings in Latin America, providing coverage for civil liability, operational continuity, and natural disaster protection for energy infrastructure. The company’s services also include insurance designed to support investment and project financing, which can help attract capital and reduce uncertainty for developers and lenders.
“Renewable energy growth has created a parallel need for insurance solutions that protect investors, operators, and local communities,” said Miguel Ángel García, Chubb Latin America’s Power and Energy Head and Climate+ Regional Practice Leader. He explained that Chubb’s approach is to balance energy transition goals with system resilience, ensuring that renewable projects remain both financially viable and operationally stable as climate impacts intensify and markets evolve.
Mexico, for instance, plays a significant role in the region’s energy landscape, with renewables accounting for about 24% of its electricity generation when excluding large hydropower. Chubb notes that the country’s energy reforms and evolving regulatory framework have shaped investment conditions, highlighting the importance of robust risk assessment and comprehensive insurance coverage for new projects. As Latin America continues to expand its clean energy capacity, the insurer expects risk management to play an ever-greater role in supporting the region’s transition and in safeguarding infrastructure critical to long-term economic and environmental goals.
Meanwhile, Argentina is taking its own steps to ensure that the benefits of energy reform reach the most vulnerable. On December 19, 2025, the World Bank approved an additional US$300 million in financing to strengthen Argentina’s institutional capacity for optimizing gas subsidies. This new funding builds on the earlier project, Supporting the Transition to a Sustainable Electricity Sector, which improved the Energy Subsidy Access Registry (RASE) and successfully reclassified 1.2 million households.
"We support the government's efforts to continue improving the targeting of gas subsidies so they reach the most vulnerable populations, who allocate a higher percentage of their income to meet their energy needs," said Marianne Fay, Division Director for Argentina, Paraguay, and Uruguay at the World Bank. The new financing aims to reach both network users and bottled gas users, with special attention to low-income households and regions without access to piped gas, where bottled gas is often essential for cooking.
The project will simplify, harmonize, and modernize the various gas subsidy schemes, making them more efficient and accessible. In particular, it plans to integrate bottled gas beneficiaries into a registry, which should make it easier for these households to access subsidies and related support programs. The overarching goals are to improve system equity, reduce energy consumption, encourage efficiency measures, and cut unnecessary expenses. The World Bank loan features a variable spread, is repayable over 32 years, and includes a 7-year grace period—providing Argentina with the fiscal space to implement these reforms over the long term.
All told, these developments highlight Latin America’s dynamic and sometimes complicated journey toward a more sustainable, resilient, and equitable energy future. From Uruguay’s long-awaited pivot to Argentine gas, to the region’s surging renewables sector and Argentina’s push for smarter subsidies, the landscape is shifting. The challenge, as always, will be to balance reliability, affordability, and environmental stewardship in a world where the only constant is change.
