Overview
Gas production in Colombia has nearly doubled over the past decade, enabling it to become a small, but important exporter of gas to Venezuela. This is the result of opening its industry to private investment and the improved security situation brought about by a cease-fire agreed with the Revolutionary Armed Forces of Colombia (FARC), which has been a force of disruption and instability in the country.
Colombia faces a power shortage because low rainfall has reduced its hydropower reservoirs. The government decided to preserve remaining hydropower stocks and rely more heavily on gas for power generation. This has reduced the availability of gas for export and exports to Venezuela have been lower than average over summer 2014.
Increasing gas production is a priority for the government as it needs to be able to meet domestic demand for electricity with low hydropower reserves, and it earns significant revenue from exports to Venezuela. Revenue generated from gas exports to Venezuela was $457.7 million in 2013.
Colombia is self-sufficient in gas and is used in the upstream sector for enhanced oil recovery and for power generation.
Colombia is set to become the destination of the world’s first floating liquefied natural gas barge. The barge will be moored offshore Tolu in Sucre province, where it will liquefy gas from the La Creciente field. The barge will have a relatively small liquefaction capacity of 500,000 tons of LNG per annum, but will be another source of revenue.
The Marxist insurgency Revolutionary Armed Forces of Colombia (FARC) and the National Liberation Army (ELN) remain powerful influences in the country. Despite the ceasefire agreed with FARC there were 259 attacks on oil pipelines in 2013, according to data from the Defence Ministry. Security is therefore, a major concern of companies operating in Colombia. FARC has been blamed for the attack on the Trans-Caribbean gas pipeline in October 2013, which disrupted gas exports to Venezuela.
The government hosted a licensing round in July 2014 to attract international investment and expand gas production. The round was a mild disappointment with only 26 out of the 95 concessions available securing offers, Colombia’s ANH hydrocarbon agency said the results were positive, given that 28% of blocks received bids, but this was much lower than the 43% of 115 blocks that received bids in the 2012 round. The auction raised $1.4 billion, significantly less than the $2.6 billion it was expected to.
Despite the poor turnout, five offshore areas attracted bids – which is taken as an endorsement of Colombia’s exploration potential – and all 11 of the onshore blocks holding undeveloped fields received bids – which is important for maintaining production levels. The government offered special terms for unconventional blocks, including discounts on royalties, an adjusted windfall profits tax and extended licences, but only two companies bid for one of the 18 unconventional concessions available.
Page updated: 28/07/2014