Colombia’s LNG opportunities

Colombia

Juan Manuel Morales, general manager of Empresas Gasco Colombia, talks to The Energy Year about how the company has penetrated the Colombian market since its entry and its importance in providing LPG in rural areas and bulk LPG. Empresas Gasco is a Chilean supplier, distributor and marketer of LPG and natural gas.

How has Empresas Gasco penetrated the Colombian market over the last 15 years?
Empresas Gasco has more than 168 years of history. It arrived in Colombia 15 years ago, being the first Chilean company to enter the gas market in our country. This occurred at a time when the country was migrating from universal to branded cylinders.
The regulation in Colombia changed, and companies started owning the cylinders for the safety of the users. The market consolidated, with larger companies, such as Abastible and Lipigas, arriving to challenge a panorama of more than 130 smaller family companies.
We decided to acquire several companies which are now under our umbrella, among which are Vidagas and Unigas. Unigas had a strong presence in central Colombia – Bogotá, Cundinamarca, Llanos and Boyacá – while Vidagas was stronger outside the central area of Colombia.
Over the years, we have focused on understanding users’ consumption habits, for example how and when they buy. This has helped us optimise logistics and establish sales points to ensure product availability and country coverage. We have 273 distributors.

How important is Empresas Gasco in the provision of LPG cylinders to remote areas and bulk LPG?
We have 13 packing plants, 11 distribution centres and over 2.3 million cylinders distributed around the country. We are the second-largest LPG distribution company in the country, with a market share of around 18.6%. There are still 1.5 million families in Colombia that use firewood for cooking, which could equate to around 8 million people, meaning that we still have a large potential market to cover.
Moreover, LPG represents 3% of the Colombian energy matrix, and there is plenty of room for growth. Colombia is still a rural country, with many areas still having no gas network. LPG is not the fuel of tomorrow but the fuel of today.
We want to be part of Colombia’s energy transition, and LPG is an affordable and accessible solution for the time being. Interestingly, our largest market is Bogotá, in areas of the city which are still disconnected from natural gas networks.
On the bulk side, we have more than 3,200 bulk LPG tanks. There are many users who require substitutes for more polluting fuels, such as coal, diesel and gasoline, because their operating systems require it. LPG is a solution, and we have been growing in the bulk market.
We are the second-largest bulk LPG provider in Colombia, with a nearly 20% market share. We are working on offering solutions according to the user’s needs. We have important industries we are now catering to, such as the poultry industry, hotels, agrobusiness, restaurants and real estate businesses.
In terms of sectors, 61% of our services cater to the industrial sector, 26% to agribusiness, 11% to the commercial sector and 2% to the residential sector. We have also considered becoming a backup for industries that today use natural gas.
As you can see, LPG is being used more and more.
The use of LPG also goes hand in hand with the conversation around deforestation and care for the environment and public health. Regardless, however, the government ought to launch the right policies simply because those who use firewood in remote areas pay nothing for firewood and are not willing to pay for gas cylinders.
We see plenty of initiatives for reforestation in Colombia, with trees that take at least 10 years to grow. We should be investing in gas accessibility for certain regions. This would not only halt deforestation but also have an immediate effect on reducing emissions and avoiding health issues from using firewood.

What does the market look like in terms of national versus imported LPG?
Currently, Colombian LPG comes from different sources. On the one hand, we have Ecopetrol’s two refineries in Cartagena and Barrancabermeja. As part of the oil refining process, a major byproduct is LPG. On the other hand, the Cusiana and Cupiagua gasfields also produce LPG as part of the gas drying process. Around 60% of Ecopetrol’s LPG comes from these fields.
In fact, Ecopetrol has a dominant position in the LPG supply in this country, supplying around 58% of the product. There are also smaller producers, such as Petrosantander or Termoyopal, that, combined with Ecopetrol, reach 63-65% of the national demand for LPG.
The declining production of Ecopetrol, along with the high demand for LPG, has become a challenge for the market. It is here where LPG importation comes in. It is essential for covering the demand gap, which is around 35% today.
A few years ago, in a consortium with Colgas (Abastible), Chilco (Lipigas), Almagas and Montagas, we built the first private initiative to import LPG in Okianus Terminals. Okianus Terminals has been essential in covering the gap in the LPG market.
We have cargo ships arriving in Colombia every 10-12 days, but given demand, we are looking at bringing at least one LPG cargo ship per week. There is a dire need to import LPG moving forward, and this is why we have decided to venture into a new LPG project with Frontera Energy to develop a new terminal.

Tell us about your recent agreement with Frontera Energy to set up a new LPG terminal.
In mid-2024, we signed an agreement with Frontera Energy and its terminal Puerto Bahía to develop a new LPG terminal. Located in Cartagena, the project is set to come on line in 2027 and involves the development and operation of a port terminal capable of importing and storing more than 20,400 tonnes of LPG.
The venture features a 20,400-tonne refrigerated tank. Additional phases may be added to capture larger volumes, depending on the market demand for LPG.
The joint project entails an estimated investment of USD 50 million-60 million. Gasco is interested in putting capex into the project and dealing with the financing process. The terminal will be situated in Puerto Bahía, which is a world-class terminal, and we are leveraging their infrastructure to advance this critical project for Colombia.

What logistics challenges do you anticipate with the increase in imported LPG?
One of the challenges we encounter is that road infrastructure in Colombia is limited. We see that if import capacities increase and Ecopetrol’s supply decreases due to field depletion, we will have to move more product from Cartagena and the Caribbean coast to consumption centres. Times will increase, and we will need more trucks to move the product.
There has been a project going on for some time to improve the navigability of the Magdalena River to transport products. The river is an alternative, but this project is still in an early stage. In any case, the country will have a major challenge moving LPG that reaches the Colombian coast. We must prepare for this.

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