A need to accelerate gas exploration

Colombia

Tomás González, director of the Regional Centre for Energy Studies (CREE), talks to The Energy Year about the need to accelerate natural gas exploration and production for the energy transition and the importance of hydrocarbons for the Colombian economy. CREE researches, analyses and discusses energy policy issues in Colombia.

How urgent is it to accelerate natural gas exploration and production for the energy transition?
The reserves-to-production ratio for gas in Colombia has decreased to 6.1 years, which confirms a trend that we have seen for a long time. If we look at the numbers, in the last 15 years, the ratio has fallen by 55%. We have not been able to incorporate reserves at the speed we require.
This contrasts with oil reserves, which have remained relatively stable over the last 15 years. We now stand at a production level of 750,000-800,000 bopd. Thus, the most pressing issue here is gas.
Simultaneously, these numbers reflect the fact that we need to secure a proper gas supply in the medium term. Secondly, we need to advance projects at a quicker pace. In the next two to three years, we will have a significant gas deficit representing around one-third of our demand. This means that the government is currently looking at options to supply gas through other means.
The first solution is to kickstart offshore gas production. The second solution is to import gas. We are looking at several alternatives which involve the expansion of our import capacity in the Caribbean Sea or the creation of new import capacity built in the Pacific. The third option is to import gas from Venezuela.
The government has stated that it will honour the exploration contracts already signed, but it will not grant new exploration licences. In the medium term, this will have repercussions. In the case of gas, we need to keep on exploring, as exploration is the basis of our future production.
In order to make the energy transition at a minimum cost and meet the country’s goals of carbon neutrality by 2050 and a 51% decrease in emissions by 2030, we need more gas. Gas is a key piece in decarbonising our country. It is a short-term component of the energy transition; it is the transitional energy.
A government that is so insistent on energy transition should see this as a sign to push these projects forwards. In fact, by 2040 we will need twice the gas we are consuming today.

How important are hydrocarbons fiscally and economically for Colombia?
In the case of crude oil, we have a very large fiscal dependency. In 2023 the hydrocarbons sector contributed 3.6% of GDP. This is to say that it is impossible to make an energy transition without a fiscal transition. What we can’t do is abandon oil before we are clear about how we are going to replace those revenues. The transition ought to be done in a rational way. Oil represents royalties and taxes to finance social spending.
The government needs to realise the importance of hydrocarbons, and it needs to keep on betting on the E&P of natural gas in particular as an important means to accelerate the transition. It should promote the sector and attract investors for these projects so they advance at a faster pace. This ultimately benefits the country’s energy security and economy. We should not neglect hydrocarbon revenues until we have a credible substitute.

What variables should be considered in deciding whether to import natural gas from Venezuela?
Firstly, the gas that would make the most sense to import is that found in La Perla, an asset operated by Repsol and Eni. However, commercial mechanisms by which this gas could be delivered from this field are not clear due to problems between these two companies and PDVSA. Unless this is resolved and the accounts payable are settled, it will be difficult to receive gas from that field.
Secondly, there is infrastructure that needs to be fixed, both pipes and compression stations. However, that could be solved without taking too much time. However, importing from Venezuela implies doing business with the Venezuelan government, which is under US sanctions and is therefore a risk. This is not to mention the fact that we would be energy dependent.
Colombia should think very carefully about whether it is worthwhile to start depending on Venezuela, although they can sell us gas at a good price. This is a geopolitical matter.
Any country should be concerned about giving such important leverage to a neighbour, especially in our case, considering the turbulent relations previous Colombian administrations have had with Venezuela. Moreover, if they were to sell us gas very cheaply, this would kill investment in Colombia’s offshore development and LNG plants.
Additionally, we have to address PDVSA’s environmental record, which is problematic. This government says it cares a lot about climate change and that it wants to reduce emissions. Yet, the data we have on Venezuela and PDVSA tell us that with one day of their flaring and venting, Colombia’s daily consumption would be covered one or two times. PDVSA’s volumes of emissions are massive.
A government concerned about the environment such as the current Colombian one should be concerned about this fact. In short, there are a number of serious variables to analyse before considering importing gas from Venezuela.

What is your take on Colombia’s decision to ban fracking?
Colombia made a poor decision with fracking. We designed a scheme by which we were going to carry out scientific research and some pilots to see the possible environmental side effects of fracking. We made probably the most expensive environmental assessment in the country’s history. It was a very serious combined effort by companies.
Unfortunately, those who objected to the idea of fracking managed to bar the initiative. We have given up reserves that, according to studies, would have allowed us to at least double the current reserves we have.
If we take the US and other countries carrying out fracking, more than 1 million wells have been drilled with hydraulic fracturing for unconventional reservoirs. Production rates have rocketed, and revenues have multiplied. We have made a poor decision that we will pay for in our bills. Until we have expensive tariffs and supply problems, we will not reflect on the consequences of this decision.

What major challenges are hampering the development of renewables in La Guajira?
La Guajira has all the potential to be a renewables powerhouse, with world-class wind and sun. The problem is that La Guajira has historically been one of the poorest departments in Colombia. It has a major problem with underdevelopment. This is not to mention corruption and indigenous dynamics that are sometimes complicated to understand. This means that it is very difficult to advance certain projects in the region.
In La Guajira you have a mixture of elements: companies that are eager to get projects off the ground that don’t always have the best standards, communities acting strategically looking for short-term gains and a lot of people wanting to make politics out of the projects. You also have a lot of external actors that come in to stir things up and NGOs that don’t always have the needs of the community in mind.
The mix of these conditions and actors makes it a difficult place to advance projects despite the potential of the region. To this we have to add the fact that there are licensing problems as well: 46% of the projects being carried out in La Guajira have licensing issues. The government needs to find a way to unlock the potential in this region because the reality is that La Guajira is the key to Colombia’s energy transition.

How is CREE contributing to the advancement of Colombia’s energy industry?
CREE was born in 2019 as a small, young non-profit institution created to research, analyse and discuss energy-policy issues in Colombia. We contribute to a better energy policy via the thorough study, analysis and promotion of public discussion. In this way, we are important actors helping to materialise the energy transition at a national and regional level.
We have also built some mathematical, quantitative models like those made by the International Energy Agency. We took the same software the IEA has, modelled the Colombian energy system and produced scenarios similar to those of this agency.
This software is very flexible and valuable for addressing policy questions and gives one accurate and hypothetical scenario. It can do very rich analysis. It took us more than 12 months to put together this system, and it is unique in Colombia.
This system has opened doors for us to talk to many people and to support those conducting analysis. We have worked with Ecopetrol, Enel Colombia, the World Bank, Grupo Energía Bogotá and TGI [Transportadora de Gas Internacional], among others. We are now finishing a very interesting project with ISA, with which we are determining the transmission needed for their transition.

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