Gas-short Colombia will need LNG by 2017: chamber

OREANDA-NEWS. February 19, 2015. Colombia will need to import LNG as early as 2017 to offset a growing shortage of domestic natural gas, the Colombian oil chamber ACP said.

"There are already signs of scarcity on the Atlantic coast," the ACP said.

Gas demand will definitively outstrip supply in 2017 on the Atlantic coast and there will be a national deficit of 190mn ft3/d (5.32mn m3/d) in 2018, compared with a 2015 surplus of 120mn ft3/d, if Colombia does not expand its reserves, the ACP said.

The chamber cited the need to stimulate investment, focus on offshore and unconventional resources, connect Colombia's interior gas transportation infrastructure with the coastal region, and maintain competitive pricing. The regulated Guajira gas price is currently \\$4.60-5.70/mn Btu, up from \\$4.10-5.00/mn Btu in 2014, but still short of a 2012 peak of \\$5.92/mn Btu. "A price increase is necessary to maintain the viability and reliability of operations, especially considering the investment that has been made and current decline rates," the ACP said.

Colombia produced 1.1bn ft3/d of gas in January. Proven gas reserves at the end of 2013 totaled 5.508 trillion ft3, down by 3.5pc from 2012. Current proven reserves cover 100pc of demand only through 2017, the chamber said.

Colombia has not yet issued specific data on 2014 reserves.

The Andean country is experiencing significant cutbacks in exploration investment because of the impact of the decline in oil prices on the many independent oil companies that operate here.

Chronic community blockades, security threats and permitting delays have exacerbated the difficult operating environment.

A consortium led by Colombian gas distributor Promigas that includes foreign investment fund Baru LNG is building a 400mn ft3/d regasification terminal near the Caribbean coastal city of Cartagena to supply thermal generators during drought years.

A separate project led by Canada?s Pacific Rubiales to export LNG from another site near Cartagena was recently postponed.

Colombia?s thermal generators depend on gas feedstock during El Ni?o, a climactic phenomenon that causes drought in the country, reducing the availability of hydroelectricity.

The country's Chevron-operated Ballenas, Chuchupa and Riohacha gas fields in Guajira province on Colombia's northern coast are declining by an estimated 13pc a year, the ACP said.

Around \\$660mn in investment raised production there from 500mn ft3/d in 2005 to a peak of 684mn ft3/d in 2011, but since then production has slipped to 510mn ft3/d.

Colombia?s state-controlled Ecopetrol is currently exporting around 50mn ft3/d of Guajira gas to neighboring Venezuela because of the market surplus under a one-year contract extension signed in June 2014.

The ACP said the exports represent just 7pc of total domestic production and are necessary to support investment in the fields. "These export volumes are subject to suspension if they are needed in the domestic market," the ACP said. "The exports will permit Colombia to obtain gas from Venezuela in the short term at prices that are more competitive than those on the international market."

The Colombian gas is shipped to Venezuela on the 150mn ft3/d Antonio Ricaurte cross-border pipeline that was supposed to have been reversed in 2012 to allow Venezuela to deliver gas to Colombia. The reversal never materialized.

Spain?s Repsol and Italy?s Eni are close to starting Venezuela?s first-ever offshore gas production from the Perla field, but the gas will be absorbed domestically for now, officials close to the project tell Argus.