• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 19 hours GREEN NEW DEAL = BLIZZARD OF LIES
  • 3 days "What’s In Store For Europe In 2023?" By the CIA (aka RFE/RL as a ruse to deceive readers)
  • 7 days America should go after China but it should be done in a wise way.
  • 22 hours Even Shell Agrees with Climate Change!
  • 3 days How Far Have We Really Gotten With Alternative Energy
  • 3 days The European Union is exceptional in its political divide. Examples are apparent in Hungary, Slovakia, Sweden, Netherlands, Belarus, Ireland, etc.
  • 3 days World could get rid of Putin and Russia but nobody is bold enough
  • 6 days Oil Stocks, Market Direction, Bitcoin, Minerals, Gold, Silver - Technical Trading <--- Chris Vermeulen & Gareth Soloway weigh in
Matthew Smith

Matthew Smith

Matthew Smith is Oilprice.com's Latin-America correspondent. Matthew is a veteran investor and investment management professional. He obtained a Master of Law degree and is currently located…

More Info

Premium Content

Colombia Is On The Brink Of A Natural Gas Crisis

  • Colombia's proven oil and natural gas reserves can last only around seven more years at the current extraction rate.
  • El Niño weather phenomenon threatens Colombia's reliance on hydroelectric power, increasing dependence on gas-fired power plants.
  • Despite recent offshore gas discoveries, Colombia's natural gas consumption outpaces domestic production, leading to increased LPG imports and a potential energy crisis.

A sharp decline in energy sector investment and a lack of world-class hydrocarbon discoveries is threatening strife-torn Colombia with an energy crisis. Natural gas shortages emerged in 2015 when the Andean country suffered a serious drought and ensuing water shortages because of the El Niño weather phenomenon. Declining natural gas supply coupled with surging demand for the fuel forced Colombia to start importing bulk quantities of Liquefied Petroleum Gas (LPG) in 2017, with inbound shipments expanding exponentially since then. Now that President Gustavo Petro has ceased awarding new hydrocarbon exploration contracts and preventing fracking at a time when demand for natural gas soars, there are fears of an energy crisis emerging in Colombia.

In late 2022, Colombia’s leftist President Gustavo Petro announced an agreement had been secured to import natural gas from Venezuela. This deal forms a key part of the president’s plans to end issuing new hydrocarbon exploration licenses in Colombia while guaranteeing the Andean country’s energy security. You see, Petro’s plan to wean Colombia off its dependence on fossil fuels, with oil the country’s largest legal export responsible for up to a fifth of fiscal income and 3% of gross domestic product, could eventually shut down the domestic hydrocarbon sector. As a major petroleum producer, Colombia has extremely limited oil and natural gas reserves, which are among the lowest of any oil producer in Latin America.

According to Colombia’s Ministry of Mines and Energy, proven oil reserves at the end of 2022 totaled a meager 2.074 billion barrels, while there were only 2.82 trillion cubic feet of natural gas. Those proven reserves have an extremely limited production life of around seven years at the current rate of extraction. For that reason, Colombia’s energy security is at risk because of the Andean country’s economic over-reliance on fossil fuel extraction. That is further compounded by the fact that there have been no major hydrocarbon discoveries in over a decade, with enhanced recovery techniques responsible for the meager 1.7% year-over-year growth of Colombia’s proven oil reserves.

Another threat to the natural gas supply in Colombia is that much of the fossil fuel produced in the country is a byproduct of oil extraction. That makes domestic natural gas supply highly reliant on oil exploration, development and production. It also creates additional supply pressure because drillers in Colombia are highly reliant upon enhanced recovery to bolster reserve replacement ratios and oil output from aging mature oilfields. Drillers typically use the associated gas produced from oil wells as an agent to bolster reservoir pressure through its reinjection. It is believed between 50% and 80% of the associated gas produced from oil extraction is reinjected to enhance recovery.

Colombia’s top four onshore gas-producing operations are the onshore Pauto Sur, Cupiagua, Cupiagua Sur, and Floreña fields, all located in the Casanare Department in the Llanos Basin. Those fields produce associated gas, meaning it is a byproduct of oil extraction. The Chevron-operated Chuchupa field on Colombia’s Atlantic coast is Colombia’s principal gas-only producing operation. Chuchupa is an aging, mature field where production peaked in 2010 and is now in decline, with the field expected to reach its economic limit in 2031. The mature Ballena offshore field, also operated by Chevron, also produces non-associated gas and is situated nearby. Ballena hit peak production during 2014 and is expected to reach its economic limit in 2039.

A series of recent natural gas discoveries in Colombia gave considerable hope of boosting domestic reserves and production. Among the most significant finds were the 2017 Gorgon-1 and 2022 Gorgon-2 deepwater discoveries in the COL-5 Block located offshore from Colombia’s Caribbean coast. The block is operated by Shell, which holds a 50% working interest, while the remaining 50% is held by Ecopetrol. There are also the earlier 2015 Kronos and 2017 Purple Angel deepwater discoveries made near COL-5 Block. Another promising find occurred at the Uchuva-1 exploratory well, which was drilled in the offshore Tayrona Block by operator Petrobras, which holds a 44.44% working interest, with the remaining 55.56% controlled by Ecopetrol. While those discoveries demonstrate there is considerable potential in Colombia’s territorial waters, in the Caribbean, it will be many years for they are developed.

For the reasons discussed, there are considerable supply-side pressures in Colombia when it comes to domestically produced natural gas. Consumption of the fossil fuel in Colombia is climbing at a steady pace, with demand now significantly exceeding supply. This first occurred in 2016 as a decline in water levels due to a severe drought triggered by the El Niño climate phenomenon saw the volume of hydroelectric power, which provides around 70% of Colombia’s electricity, plunge. That placed considerable pressure on Colombia’s already fragile electric grid, forcing Bogota to employ natural gas-fired power plants to bolster electricity output at a crucial time. That added to the growing supply shortage of the fossil fuel, which was resolved by ramping up LPG imports.

There are fears that the recent arrival of the El Niño weather phenomenon in Colombia will once again sharply impact water levels and, hence the output from the country's hydro-plants. This will force Bogota to expand electricity production by employing gas-fired powerplants to boost output, placing further pressure on already constrained natural gas supplies. Rapidly rising demand for natural gas, including stockpiling the fuel for use in thermal powerplants due to the threat posed by El Niño, saw LPG imports for the first eight months of 2023 soar. Data presented by Bloomberg, shows Colombia imported 309,000 metric tons of the fuel for that period, which represents a stunning 60% increase over the total amount of LPG shipped to the Andean country for all of 2022 and triple the annual volume for 2021.

The rate at which consumption of natural gas is growing in Colombia, coupled with declining domestic production, which will accelerate due to Petro’s ban on hydrocarbon exploration, will cause imports of the fuel to accelerate. This is placing greater pressure on Bogota to significantly increase the volume of LPG cargo being received by Colombia, threatening the balance of trade and energy security. It is predicted that the once energy-self-sufficient country will become a net importer of natural gas by 2030. Even recent natural gas discoveries will do little to expand domestic supply and alleviate the threat of an energy crisis while exacerbating existing economic weakness caused by a ballooning trade deficit.

By Matthew Smith for Oilprice.com

ADVERTISEMENT

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News