The evolution of natural gas in Colombia and Latin America

The evolutio n of natur al gas in Colombi a and Latin Americ a

Natural gas is bringing major economic and social benefits to Latin America and its role will increase with demand forecast to grow 60% by 2040. By Orlando Cabrales Segovia

Natural gas in Latin America is a driver of growth, as it is in the rest of the world, but its role in social development is particularly important, giving people access to a cleaner-burning energy supply and improving air quality and public health.

The share of natural gas in the energy matrix is expected to grow in several countries of the region and production will increase due to the development of offshore, continental and unconventional hydrocarbon resources. Regional and international trade – by pipeline and as LNG – will also increase.

Colombia is making progress

In Colombia, where the use of natural gas dates back to a government initiative started on the Caribbean

coast in the 1960s, moves to extend access throughout the country and encourage mass consumption began in the 1980s. This year, connections have reached 10 million (representing coverage of 70% of Colombia’s population). Natural gas has become the preferred and most competitive clean fuel for commercial, industrial and residential users, generating a true social revolution by playing a growing role in the development of businesses, family life and transport. We are sure that these good results will continue.

Some 20% of current production in Colombia comes from discoveries made in recent years inland in the Caribbean region. In addition, the Cartagena LNG regasification terminal, which was inaugurated in December

c Colombia’s gas resources include the offshore Chuchupa field in the Caribbean Guajira basin. 2016, has proven to be a reliable and safe back-up for the power generation system. In 2018, the terminal received seven shipments of natural gas and delivered 10 bcf (28 mcm) to the national transport system, while during 2019, six shipments were received delivering 5 bcf (140 mcm).

The industry continues to advance and modernise. In the last five years, the country’s gas pipeline network has been extended by 278 km to reach 7,499 km. In terms of transmission, the expansion of the transport infrastructure in 2019 represented an investment of $300 million, which added 220 mcf/d (6 mcm/d) to the system. A new plan to expand the country’s infrastructure has been published recently which envisages an investment of $1 billion, including a second regasification terminal on the Pacific coast in the next five years.

In terms of mobility, last year ended with more than 1,500 heavy-duty dedicated vehicles in service represented by buses, trucks, dumpers and refuse trucks. Additionally, in 2019 the number of vehicles converted to hybrids (to run on compressed natural gas [CNG] and gasoline) increased by almost 40% over 2018. According to

the Ministry of Mines and Energy, in recent years more than 600,000 cars have switched to natural gas as a more economical and efficient fuel, with the greatest number of conversions in the capital, Bogotá, and the cities of Barranquilla, Cali, Medellín and Pereira.

When it comes to freight vehicles, Colombia already has more than 210 trucks running on CNG. Freight transport is the main pollutant in cities and causes poor air quality. In Bogotá, for

z The floating storage and regasification vessel Höegh Grace serves as Cartagena’s LNG terminal.

v Over 50% of the buses of Bogotá’s TransMilenio rapid transit system now run on CNG.

example, it is responsible for 32% of the emissions of particulate matter.

Recently, Colombia was portrayed as a case study for its air quality improvements by IGU, where Bogotá’s efforts to improve the quality of air on its streets by using natural gas to fuel its rapid transit bus system stood out. (See the article on pages 94-95 of this issue.)

However, according to the most recent report of the Colombian National Institute of Health, more than

15,600 deaths can be attributed to diseases associated with poor air quality and, according to the national government, the estimated annual cost of morbidity and mortality associated with this issue is $3.5 billion (1% of 2018 GDP). Another study suggests that indoor air pollution causes more than 67 million diseases and symptoms due to air quality issues.

This shows that more needs to be done and there is greater potential for natural gas to improve public health and air quality in cities. New supplies will help and Colombia has a potential of 4 to 24 tcf (112-672 bcm) in unconventional resources in the Middle Magdalena Valley and the Cesar Rancheria basins. Meanwhile, the development of offshore projects continues to advance with the signing of new exploration and production licences to develop the potential of 7 to 30 tcf (196-840 bcm) in the Caribbean Sea.

Around Latin America

Including Colombia, Latin America’s natural gas consumption in 2018 was 168 bcm. While that represented a

2.5% decline over 2017, the longerterm outlook is positive with natural gas expected to give a competitive edge to the region helping to improve its air quality. According to ExxonMobil’s 2019 energy outlook report, consumption is forecast to have an average annual growth rate of 2.2% until 2040 reaching 290 bcm. The outlook for Mexico (which is often included in North America for statistical purposes and consumed 89.5 bcm in 2018) is also one of strong growth.

The key challenges are to remain competitive throughout the value chain so that end-users benefit from a competitive fuel and policymakers make the right decisions in favouring cleaner fuels that improve the air quality of major cities and reduce CO2 emissions. Of course, the industry must make significant efforts in reducing methane emissions and the carbon footprint in its operations.

Argentina

Globally, Argentina ranks third in technically recoverable shale gas resources and fourth in technically recoverable shale oil. The Vaca Muerta shale play, which covers an area of 30,000 km2, has allowed an increase in gas production of 17% in the last two years, which by the way has lowered fuel prices.

In October 2018, YPF (the government controlled energy company) restarted pipeline exports to Chile and in June 2019 exported the country’s first LNG test shipment from the

Tango floating LNG facility in Bahía Blanca. Later that year, on October 26, it made the first commercial LNG export to Salvador, Brazil. Tango has a small capacity of 0.5 mtpa and there are longer-term proposals to build a much larger liquefaction plant in Bahía Blanca.

Argentina is expected to return to the path of gas self-sufficiency achieved in previous decades, reducing imports from Bolivia considerably.

Bolivia

Bolivia’s natural gas reserves guarantee supply to the local market and have allowed exports to Argentina and Brazil. The largest domestic consumers are the power, industrial and transportation sectors and together they represent about 65% of the total internal demand for natural gas.

However, the development of new gas resources in Argentina and Brazil is forcing the Bolivian Government to seek alternative markets. Bolivia’s trade balance and its fiscal stability depend on gas exports which represent about

c Globally, Argentina ranks third in technically recoverable shale gas resources, notably in the Vaca Muerta shale play.

85% of the country’s revenues from hydrocarbons.

Gas integration and access to new markets will depend on the ability to secure export routes through neighbouring countries and to attract investment in exploration and the construction of new infrastructure.

Brazil

Despite its potential, natural gas has a relatively small participation in Brazil’s energy mix. Hydroelectricity plays a big role with gas acting as back-up in the dry season. In 2018, natural gas accounted for 10% of primary energy consumption.

Associated natural gas in the offshore pre-salt fields is expected to break even in the medium term and could become a significant source of supply to the region and the world. The production of natural gas associated with these fields is expected to enter the Brazilian market as the infrastructure is built to connect offshore operations.

ISC C u s t o m i s e d C o n t r a C t P u b l i s h i n g s o l u t i o n s International Systems and Communications Limited (ISC) was set up in 1991 to offer a high-quality, customised publishing service for event-linked, commemorative and annual publications. Today’s prestigious client base is testimony to a business philosophy based on quality and a flexible approach. InternatIonal Gas April – September 2020 I n t e r n a t I o n a l G a s April – September 2020 IGRC2020: OveRCOmInG the ChallenGes Water Matters An insight into the successes and challenges facing the European water sector Water Matters World Petroleum Council Guide Careers in Oil and Gas World Petroleum Council Guide Careers in Oil and Gas ■ C L I E N T S Organisations including the International Gas Union, World Petroleum Council, United Nations Conference on Trade and Development, Universal Postal Union and European Federation of National Water Services have contracted ISC to produce publications. ■ Q U A L I T Y Experienced editing, production and sales team; editorial contributions from respected journalists and international figures; and highquality production standards. ■ F L E X I B I L I T Y We tailor our services to meet your requirements ranging from an advertising sales and printing contract to a full turnkey operation including multiple language editions. ■ D E L I V E R Y On-time performance; international distribution. ■ S E R V I C E T O A D V E R T I S E R S Targeted access to an international audience of influential decision-makers; full design and production service available for advertisements. For all your contract event-linked, commemorative and annual publishing needs contact Robert Miskin, Publisher: I N T E R N A T I O N A L S Y S T EM S A N D C OMM U N I C A T I O N S LT D 140 Tachbrook Street London SW1V 2NE England Telephone: + 44 20 7901 3830 Facsimile: + 44 20 7901 3838 E-mail: general@isyscom.com Website: www.isyscom.com

www.world-petroleum.org

EurEau The European Federation of National Water Services

Peru exports approximately one-third of the gas it produces from the Peru LNG plant in Pampa Melchorita.

Peru

Recently, Perúpetro reported that Peru has enough natural gas reserves to meet internal and external demand for the next 35 years. Approximately two-thirds of current production from the Camisea region supplies domestic consumers with one-third exported as LNG, principally to customers in Asia and Europe.

Chile

The main consumer of natural gas is the power generation sector, where it is used in combined-cycle thermoelectric plants. Other users of gas, although in smaller volumes, are the industrial and mining sector, the commercial, residential and public sector, and the transportation sector.

In 2018, Chile resumed imports of natural gas from Argentina after a decade of supply interruption which led the country to build two LNG regasification terminals.

Guyana

Guyana is a new player in the region’s gas industry due to its new massive offshore discoveries. This might allow it to become a game changer in the region and an important source of supply to gas markets in the long term.

Mexico

Finally, it is relevant to highlight that Mexico intends to increase its production and to reduce imports from the USA. In the last 10 years, production has fallen by 30% and purchases from the United States are expected to increase 38% in the next three years. President López Obrador has reiterated his opposition to fracking saying the country should depend exclusively on its conventional resources.

Fracking debate

Exploiting Latin America’s large unconventional gas resources through responsible hydraulic fracturing operations with the highest environmental and social standards offers the potential to increase prosperity and improve access to energy. However, there are many myths about fracking and a lot of misinformation that arouses fear and suspicions amongst the general public, particularly in Argentina, Colombia and Mexico.

There are several studies that demonstrate that fracking can be used safely without damaging the environment. Likewise, countries such as Colombia have put in place robust regulation to mitigate the risks associated with this activity. It is very important that science drives the public debate and informs public policy. The debate has become very emotional and turned into an argument that is far from technical and scientific.

Long-term role for natural gas

As an efficient and a lower-emission fuel (in terms of particulate matter and CO 2 ), natural gas is playing a significant role in improving air quality in major cities and helping to overcome the energy poverty situation that still affects millions of people around the globe.

With climate change driving the energy debate worldwide, natural gas can also play a central role by complementing renewable energy. As the cleanest of the fossil fuels, natural gas will have an important place in the world energy mix for many decades to come.

Orlando Cabrales Segovia is the CEO of Naturgas (www.naturgas.com.co), the IGU Regional Coordinator for Latin America and the Caribbean and a member of IGU’s Task Force 3 – Energy Policy.