Natural gas is the fuel of the energy transition in Colombia and in the world. This is established by the various projections of energy demand and supply, regardless of the scenario, with the available information and technology. That is why it makes sense to bet decisively on national production and domestic consumption, in the different sectors: thermal, industrial, residential, and transportation, without jeopardizing supply.
This seems to be the premise of the Ministry of Mines and Energy, according to the technical study on the subject, in consultation, from the Mining and Energy Planning Unit, UPME. This indicates that the country requires significant investments in the sector to facilitate the entry of a new local supply into the system, while ensuring supply, especially starting in 2024, when it is expected that the local gas supply will be insufficient.
The UPME conducts an analysis of the proven natural gas reserves and the expectations of new reserves in the short, medium, and long term. It examines the different scenarios: the one that arises from the currently declared production, the one that depends on transportation infrastructure (natural gas “trapped” on land), the one planned to be developed offshore, and the one coming from unconventional deposits, using fracking technology. In all scenarios, the UPME indicates that the country will have to import gas starting in 2024 – currently, it is done in the Caribbean to partially meet the demand of the industrial sector generated by gas thermal plants – and indicates that regardless of the infrastructure works to extract the trapped gas, connecting the gas from the interior of the country with that of the Caribbean Coast and achieving the bidirectionality of the system, the Pacific Regasification Plant is required.
The Unit establishes, after an analysis, that the cost of building a new plant in Buenaventura, with a pipeline to Yumbo, is lower compared to the alternative of not building it. This is what they call the Cost of Regret (of not building it, in the face of a local supply with different levels of certainty). Moreover, it considers that a second plant in the Caribbean could be necessary in ten years at the latest, if the prospects for local gas do not materialize.
The crux of the matter, as is often the case, is who will pay not only for the plant but also for all the works that the Supply Plan demands, which total US$792 million. The UPME conducts an analysis with various variables: the beneficiaries of each project, transportation costs; and proposes tariff options, with a national or regional stamp, including one derived from a commitment of the thermal plants in the interior to contract part of the new imported gas.
And this is so because the Pacific regasification infrastructure would serve a dual function: supply and reliability. That is why the technical study proposes that the thermal plants in the interior (Southwest and Magdalena Medio) contract at least 35% of the imported gas, equivalent to 140 GBTUD, which would significantly reduce the amount to be financed via stamp, impacting the gas bill less.
As expected, no one likes to pay. But given the needs of the country and generation, the thermal sector should contribute more to what the plan proposes, among other reasons because it has leverage, which is the reliability charge it already receives. And it should be evaluated that the regulated demand using the regasification plant in the future should also contribute. That is, just as was done to finance the Cayao plant on the Atlantic Coast.
The most important thing is that the scheme minimizes the final impact on the price for consumers, in order to continue boosting gas demand within the energy basket. The government's goals aim for demand to double in the future, but for this energy source to be sufficiently competitive.
Hopefully common sense prevails, that is, the general interest of Colombians. And it is in everyone's interest that Colombia continues to make use of its energy resources, including natural gas, and that hopefully it reaches the majority of corners of the country with reasonable rates. But for that to happen, investment is necessary. Development does not come for free.
The oil and gas industry trusts in the country's gas potential. And it is only logical that it defends national production over imported and alerts about asymmetries against it. Especially when local gas generates royalties, jobs, development, and more competitive rates. But it would be foolish to overlook the predictability of UPME in the Supply Plan; it is their responsibility to make decisions, and on time, so that the country always has this energy source.
UPME has outlined a plan to guarantee the country's natural gas supply.
It is an adjusted version that takes into account the expectations of new reserves and identifies the investments required to develop it. And it does so while clearly and technically proposing options for Colombia to continue boosting demand without any fear of running out of this resource.
Colombian Association of Oil and Gas