In search of self-sufficiency in gas

In June 2019, alarms were raised in the national natural gas sector. According to a report from the National Hydrocarbons Agency (ANH) and the Ministry of Mines and Energy (MME), a 2.9 percent drop in proven gas reserves was evidenced compared to the previous year, accompanied by a troubling conclusion: “Projections show –the study points out– that if we do not find new sources in 2021-2023, we may need imported gas to meet residential demand in some areas of the country, at a price of more than double the internal cost.”.

2. The concern prompted the main actors in the sector to mobilize. The Colombian Petroleum Association (ACP), in fact, agreed with the National Government to form a technical committee to build a unified vision, Government-industry, on the potential of incorporating new gas supply into the market and implementing a work agenda to promote its development.
3. [prefix_blockquote align=»right» pull=»yes» italic=»yes»]Colombia faces the urgent need to incorporate new natural gas reserves to avoid having to import the fuel in the medium and long term. Although the future does not look easy, there are ongoing projects that, if they resolve their contingencies, could incorporate enough supplies to stop worrying for at least a few years.[/prefix_blockquote]The Vice President of Economic and Regulatory Affairs of the ACP, Alexandra Hernández, points out: “we conducted a preliminary identification of new gas supply projects to be implemented in the next six years, which were not certified as proven reserves and therefore not reported as production available for sale because, according to the regulation, they correspond to resources subject to contingencies –market conditions, infrastructure, pending procedures– and prospects, but could come online in the short and medium term if those contingencies are overcome.”.

4. The ACP also prepared a report evaluating the impact of this new supply on Colombia's gas self-sufficiency, the challenges for its development, and proposals to achieve it. Additionally, it proposes strategies to consolidate a public policy to promote the development of new national gas supply.

5. Moderate optimism.

6. [prefix_blockquote align=»right» pull=»yes» italic=»yes»]The ACP agreed with the National Government to form a technical committee to build a unified vision, Government-industry, on the potential of incorporating new gas supply into the market and implementing a work agenda to promote its development.[/prefix_blockquote]Although the news is concerning, there are, however, optimistic voices from the operators. “Conventional onshore exploration, particularly within the gas-rich basin of the Lower Magdalena Valley (VIM), is key to replacing declining production and the reserves of Cusiana-Cupiagua and Ballena, Colombia's largest fields –says Charle Gamba, CEO of Canacol Energy–. Canacol's exploration efforts over the past seven years in the VIM have resulted in reserve additions of over 600 trillion cubic feet and production of over 200 million standard cubic feet per day.”

7. The ACP report also confirms this optimism: »The information compiled by the Association to date corresponds to 15 interviewed companies, which, preliminarily, have in their investment plans 12 new gas projects, mostly from conventional reservoirs, the report explains. »These initially identified projects could contribute to the market 46 million cubic feet per day (mpcd) starting in 2021, 241 mpcd in 2023, and at least 426 mpcd starting in 2026,» warns Hernández.

8. [prefix_counter count_end=“29″ suffix=“%” count_color=»#fa4900″ count_size=»52px» text_color=»#000000″]was the drop in proven gas reserves in 2019 compared to the previous year.[/prefix_counter]With this new gas, the country could meet its needs with national sources until 2028, which is the medium demand scenario for gas projected by the Mining-Energy Planning Unit (UPME). Since the UPME's demand forecast includes the thermal plants served by the Cartagena regasification plant, if the new gas from national sources that could enter the market is added to the imported gas from the Cartagena regasification plant, the country could meet its gas demand until the end of the next decade, the report highlights.

9. »This new supply reflects the commitment and interest of companies to invest in gas exploration and production for the country's supply –says Alexandra Hernández–. Evidence of this is that 26 new supply sources emerged, resulting from sustained investments over the last 10 years and helped to offset the decline of mature fields. Without these new discoveries, the country would have started importing gas since 2018 to meet part of the national demand.».

“This new offer reflects the commitment and interest of companies to invest in gas exploration and production, for the supply of the country –says Alexandra Hernández–. Proof of this is that 26 new supply sources emerged, resulting from sustained investments over the last 10 years and helped to offset the decline of mature fields. Without these new discoveries, the country would have started importing gas since 2018 to meet part of the national demand.”.

The dilemma of ‘fracking’

According to some studies, the country has the potential to incorporate more than 20 trillion cubic feet (seven times the current proven gas reserves), leveraging resources from conventional and unconventional sources, onshore and offshore.

“The success of conventional exploration

offshore and unconventional onshore is important to ensure that Colombia does not need to import gas, and that the fluid remains a fundamental part of the clean energy matrix beyond 2030,” adds the CEO of Canacol Energy. For the executive, offshore exploration will require significant amounts of capital investment and timelines of up to 10 years to be commercialized, given the challenging technical nature of developing gas fields in deep and ultra-deep waters. However, at the same time, he warns: “Unconventional exploration will require significant advances regarding regulation, which is currently stalled due to the lack of understanding of the concept of hydraulic fracturing by the general public. Some voices, with a political agenda, add fuel to the fire in the movement against implementing this technology in Colombia, which is safe and proven.”.

Regarding the use of fracking, he concludes: “Even if the regulation on unconventional exploration were approved, it would take at least five years, and a massive amount of investment, before representative quantities of natural gas are produced from unconventional deposits. If success is not achieved in conventional offshore exploration or in unconventional onshore exploration, in the long term, Colombia will have to face the reality of having to import natural gas and oil at a significant cost, which will be paid by users in gas and electricity consumption in households. The importation of these fuels, along with the absence of jobs, royalties, and taxes associated with domestic production, will have a terrible impact on the Colombian economy in the long term.”.