Three Colombian electric power generators are together proposing a liquefied natural gas import terminal on Colombia's Pacific Coast to insure gas supplies to the country, a top industry official said Monday.
Planning for the $350 million LNG re-gasification facility is in advanced stages, Eduardo Pizano, president of NaturGas, Colombia's largest natural gas industry association, told reporters.
The LNG project, he said, was planned by three electric power utilities: EPM, the municipal utility of Medellin; Colinversiones, Colombia's fourth-largest power generator; and Isagen, owner of four hydroelectric power and one thermoelectric power generation plants in Colombia.
"These generation firms are worried about having problems with gas supply and so they have to plan for all possibilities," Pizano said.
The proposed LNG project is in response to a December 2010 report by Colombia's Regulatory Commission for Energy and Gas, known by its Spanish initials CREG, that warned of an upcoming gas shortage that could be exacerbated by El Nino climate conditions.
Although the LNG facility would likely be built on the Pacific Coast to easily access supplies from Peru or Asia, Pizano said its location has not been determined. Also possible is Colombia's Caribbean Coast, especially if large gas deposits are discovered there by upcoming offshore exploration efforts, in which case the LNG project might include a liquefaction function.
Colombia currently produces about 1.1 Bcf/d of gas, three-quarters consumed domestically, with about 250,000 Mcf/d of the gas sent to Venezuela. But CREG is concerned that declining reserves could leave the country vulnerable to shortages.
CREG noted that LNG is increasingly a valid option for Colombia's power generators and industrial consumers, given liquefaction facilities in Trinidad and Tobago and Peru, the growing LNG tanker fleet and flexible contracts that can be adapted to seasonality of thermoelectric consumption.
But Pizano warned that LNG comes at a higher cost currently three times the cost of domestically-produced gas that would have to be absorbed by consumers.
"The cost of LNG currently is about $12 (per million BTUs) versus $4 paid for Colombian production," Pizano said.
NaturGas' estimate of Colombian gas reserves is not as dire as CREG's, Pizano said, adding the group believes Colombia has seven years' worth of gas, a timeline that could be extended as producers Chevron and Equion improve recovery methods.
Improved recovery methods prompted Chevron to re-open its Riohacha gas field in the Guajira in recent weeks. The company expects to add 60,000 Mcf/d to its production there by the end of the year, Pizano said.
Cusiana, the ex-BP oil field acquired by Equion, could see an another 260,000 Mcf/d of production over the next year or two, as gas formerly reinjected to ease crude extraction is routed to the market, Pizano said.
