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Ecopetrol And The Transition
Colombia’s Ecopetrol SA meanwhile is trying to employ more natural gas in its portfolio. Executives have called natural gas “the hydrocarbon of the energy transition.”
Natural gas and its derivatives were 24% of total company output in 2022, executives said. Ecopetrol has set a goal of getting this number to 35% by 2030 as part of their energy transition strategy.
Latin American Nations, Long Focused on Oil, Look to Monetize Natural Gas Resources
Expect more natural gas output from Latin American nations, according to recent earnings calls and presentations from regional government officials and executives.
On March 9, the CEO of Petrobras, Jean Paul Prates, met the Minister of Mines and Energy of Colombia, Irene Vélez Torres, during CERAWeek programming in Houston, Texas (USA).
Jean Paul Prates commented on the challenges that bring Brazil and Colombia together as countries rich in renewable resources and the responsibility to preserve the Amazon Forest, the largest tropical forest in the world, which occupies the territory of both countries.
The CEO of Petrobras highlighted Petrobras’ environmental projects for the protection of the forest and reinforced the need to combine efforts by the energy industry and governments in favor of environmental preservation. He cited the Petrobras operation in Urucu, in the Amazon, as a case of success in developing activities in the oil and gas industry and preserving the environment.
Ecopetrol also is taking part in oil and gas ventures overseas, including in the United States and Brazil. A technical team is evaluating the company's possible participation in a bidding round in Guyana that will receive bids through April, Bayon said.
Ecopetrol's future production in those countries also is expected to contribute to Colombia's availability of crude and gas while complementing its own reserves, which currently only cover some eight years of demand.
"I think (Guyana) is super interesting from the geological point of view... Everybody wants to go to Guyana nowadays," he said, without elaborating on possible bids.
According to Bayon, a more pressing issue to tackle by Colombia and Venezuela is the need for power interconnection aiming for a wider regional network.
The executive also said the gas reserves to develop could help the company compensate for the lack of shale developments if the Congress progresses in a proposed fracking ban.
But Bayon and other Colombian oil executives believe at least three offshore gas prospects could help increase the Andean country's proven reserves by over 70% in coming years.
HOUSTON, March 10 (Reuters) - Colombia can go without Venezuelan natural gas because of promising offshore developments of its own, Felipe Bayon, chief executive of state-controlled oil company Ecopetrol (ECO.CN), told Reuters.
Companies have proposed reactivating a dormant gas pipeline that connects Venezuela's Western region with Colombia using a concession granted by Venezuela's state-run PDVSA, which financed and built the 16-year-old line.
Slept great last night even with the time change, BBall! Great things coming here iMO. Good luck longs!
Matthew Lipton, co-head of infrastructure investment research at private equity outfit Partners Group, said his firm takes the view that, “until there's a technological step-change, [gas] is a necessary complement in the energy transition.”
The second impact, according to Wassenaar, has been to drive wider interest in funding the decarbonization of oil and gas operations.
As more financiers adopt the view that oil and gas will be a significant part of the energy mix for years to come, many are asking “how do we make those processes a lot more environmentally friendly?” she said.
The third impact has been wider financing available for industrial decarbonization.
“I hear a lot of people saying, ‘hey, I want to finance the ‘gray to green’ [transition] … I want to figure out how I can help these businesses who are here, get here, rather than totally staying away from them and just saying, ‘hey, we just put a lot of money in solar and wind,” Wassenaar explained.
You're hearing a lot more around LNG as a transition fuel,” she said. Fellow panelists agreed.
Olivia Wassenaar, head of sustainable investing and natural resources for private equity giant Apollo, separately outlined three key ways this shift is influencing capital flows. First is a reduced stigma surrounding natural gas.
“You're hearing a lot more around LNG as a transition fuel,” she said. Fellow panelists agreed.
“I think with what happened in Europe, clearly a number of banks have moved to a place where they’re going to go back and finance gas,” Ecopetrol’s Caballero noted. “It goes way beyond security of supply. It’s a conversation about inflation,” he added.
The energy crisis is facilitating a more nuanced approach to “green” finance and broader energy lending, as the staying power of oil and gas makes the funding of natural gas and the industry’s decarbonization more acceptable, private capital lenders and industry leaders say.
Could not agree more! Big risk, big reward.
Our time has to be coming soon!
There is also surging demand for natural gas from Colombian households and industry where it has become a key low-cost fuel used for a variety of purposes from heating and cooking to manufacturing applications. Gas-fired electricity generation is also becoming progressively more important in Colombia. A sharp decline in water levels due to an extended drought and the El Niño weather phenomena during 2015 and 2016 caused electricity output from Colombia’s hydroelectric plants to decline sharply. That placed considerable pressure on a national electric grid that was already plagued by inadequate infrastructure, faults and frequent outages. To ensure that adequate electricity is produced, Bogota implemented a strategy aimed at building gas-fired plants to provide additional electricity production during times hydroelectric output low. That placed greater pressure on already constrained natural gas supplies.
Natural Gas Shortages In Colombia: Is An Energy Crisis Imminent?
Colombia's leftist president, Gustavo Petro, plans to end contracting for hydrocarbon exploration.
The plan has raised concerns about risks to the country's petroleum-dependent economy and energy security.
Natural gas shortages could trigger an energy crisis if Colombia proceeds with the plan to cease issuing new oil exploration contracts.
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The strife-torn Latin American nation of Colombia is facing considerable uncertainty after the first leftist president in the country’s modern history Gustavo Petro embarked upon a plan to end contracting for hydrocarbon exploration. Industry tax hikes have already ratcheted-up the level of fear and there are significant concerns Petro’s plan will not only shock Colombia’s petroleum-dependent economy but endanger the Andean country’s energy security and even spark a crisis. It is an ever-growing shortage of natural gas which will be the most likely trigger of an energy crisis, with declining domestic supply and rising demand already having forced Colombia to significantly increase liquified petroleum gas imports. The risks of such a crisis emerging are very real if Petro proceeds with his plan to cease issuing new oil exploration contracts.
For roughly a decade, Colombia’s national government in the capital Bogota has been grappling with growing natural gas supply constraints at a time when demand for the fuel is rising rapidly. The dwindling natural gas supply can be primarily blamed on inadequate proven reserves, a lack of exploration and aging mature gas fields with rising decline rates. By the end of 2021, according to Colombia’s energy ministry, the country had only 3.1 trillion cubic feet of proven natural gas reserves, which at the current rate of production of around 1.1 million cubic feet daily, is only sufficient for another eight years. This points to current reserves being incapable of meeting domestic demand for natural gas in the near future. It is for this reason that Bogota started bulk imports of liquified petroleum gas in late-2017.
We are incorporating lessons learned and know-how to develop two megaprojects that will hopefully have a final investment decision approved by the end of the year," Yeimy Báez, Ecopetrol's head of low emission strategies, told analysts during a quarterly earnings call.
Ecopetrol produced around 130,000t/y in 2022, of which 90% was gray – created from natural gas or methane without carbon capture – and 10% blue, produced from gas with carbon capture and storage.
Colombian state-run oil company Ecopetrol aims to begin industrial-scale green hydrogen production as soon as 2025 as it ratchets up energy transition plans, executives said on Wednesday.
The company is using knowledge garnered from a pilot facility at its Cartagena refinery to develop two projects that will produce up to 9000t/y and boast electrolysis capacity of 60MW
Thanks for the fair perspective here.. my money is on the company will give us an update at some point. hope you’re doing well R/C!
Boosting Colombia's natural gas reserves while promoting the fuel's role in the domestic energy mix will assist Petro with achieving a sustainable energy transition and reducing greenhouse gas emissions to the levels set out in the UN's national climate plan for the Andean nation.
This is placing ever greater pressure on Colombia's economy because Natural gas is an important part of Colombia's overall energy mix, providing 28% of all energy consumed in the Andean country. Rising domestic demand for natural gas is being driven by it is an important fuel for Colombian households. Natural gas provides affordable heating and cooking in a country where 39% of the population lives in poverty, with another 12% mired in extreme poverty. Any sharp increase in domestic prices, because of increasing reliance on international imports as well as the constrained domestic supply, will impact already challenging economic and social conditions for Colombia's households.
Natural gas is regarded as a clean hydrocarbon with it emitting, when burnt, around half the carbon dioxide of thermal coal and 30% less than crude oil while fulfilling nearly all the roles played by coal and oil. For those reasons, it has been adopted as the transitional fossil fuel of choice in a world seeking to reduce carbon emissions, contain global warming and meet the emission targets established by the UN Framework Convention on Climate Change. The substitution of natural gas for coal in the U.S. as fuel for power plants, where it accounted for 38% of the electricity generated in 2021, has been a key factor in the reduction of emissions in the world's second-largest consumer of fossil fuels. Since 2014 there has been a push by Colombia's national government in Bogota to replace coal-fired powerplants with natural gas-fired facilities.
I think you are correct.
Thanks for the insight energy.
Thanks as always for the input. I know I’m the unpopular opinion here but, still believe we will get some good updates from the company at some point. If not then Godspeed. Good luck longs..
Yes, seems like a lot of activity in this area and I read somewhere natural gas can be used as a source for hydrogen.
Colombian gas supply fell 2% in January amid lower consumption in the industrial, residential and thermoelectric sectors.
Gas transported through the SNT national pipeline network and other infrastructure dipped to 1,025BBTU/d (billion British thermal units a day) in January from 1,044BBTU/d in December, gas market operator BMC said in its latest monthly report.
Contracts signed under the CF95, firm and interruptible modalities comprised 67.4% of the total gas sold on the primary market at prices ranging from US$4.46/MMBTU to US$5.01/MMBTU.
The Cusiana and Cupiagua Sur fields contributed the largest volumes to national supply, with a total of 260BBTU/d. Next was Cupiagua with 221BBTU/d, followed by Block VIM-5 (121BBTU/d), Guajira (108BBTU/d) and Floreña (67BBTU/d).
Eighteen pipelines operated at more than 90% of capacity, two fewer than the previous month.
They were: Ballena-La Mami, Barranquilla Cartagena, Barranquilla-La Mami, Cartagena-Sincelejo, Jobo-Sincelejo, La Creciente-Sincelejo, Barrancabermeja-Bucaramanga, Gibraltar-Bucaramanga, Cusiana-El Porvenir, El Porvenir-La Belleza, La Belleza-Cogua, Cogua-Sabana F, La Belleza-Vasconia, Guando-Fusagasugá, Pradera-Popayán, Yumbo/Cali-Cali, Floreña-Yopal and Apiay-Usme.
Meanwhile, January gas demand reached 831BBTU/d, compared to 847BBTU/d in December.
Industry remained the largest contributor with 262BBTU/d, down from 271BBTU/d a month prior, followed by households (167BBTU/d, down from 177BBTU/d), refineries (145BBTU/d, up from 133BBTU/d), thermoelectric generators (122BBTU/d, down from 126BBTU/d) retail (55BBTU/d, down from 56BBTU/d) and natural gas vehicles (50BBTU/d, down from 54BBTU/d).
Colombia has become one of Latin America's clean hydrogen pioneers as it reaps the benefits of a clear government growth plan, incentives for investors, optimal conditions for renewable energy generation and port access to two oceans. Here is a snapshot of the latest developments in Colombia's green and blue hydrogen buildout.
ROADMAP
Colombia's mines and energy ministry unveiled its long-term blueprint for clean hydrogen last year, outlining plans for up to 3GW of electrolysis capacity by 2030 and envisaging wide-scale adoption of fuel-cell vehicles.
In addition to citing the vast potential for green hydrogen production from renewables – via water electrolysis – the roadmap sets a target of 50 kilotons of blue hydrogen capacity derived from natural gas over the same period.
Investments in the segment are seen ranging from US$2.5bn to US$5.5bn, while 10,000-15,000 jobs are expected to be created.
Cheniere Energy, the biggest U.S. LNG exporter, more than doubled its revenues in 2022 from a year earlier as Europe imported increased volumes and paid high prices for gas as it sought to replace Russian pipeline supply.
That’s interesting EB, sounds like some great potential and maybe opportunity. Thanks for sharing.
It’s a penny stock.. high RISK, high reward. Thats the deal…still hopeful it will be the latter. Good luck longs.
Gustavo Petro is six months into a presidency that promised new measures to accelerate Colombia's energy transition. Can the country’s first progressive government in recent history pull this off?
The government’s plan is to “strengthen existing contracts and unlock the suspended ones”, while beginning a “progressive and gradual” energy transition to more renewables and the democratisation of power generation.
During the WEF in Davos, Irene Vélez-Torres, Colombia’s Minister of Mines and Energy, said: “We decided that we are not going to award new gas and oil exploration contracts […] as part of our commitment to the fight against climate change because we know that this decision, which is planetary, is absolutely urgent. We reviewed existing contracts and it was determined that they would guarantee the national gas supply until beyond the year 2037 and there may even be surplus resources.”
The government’s plan is to “strengthen existing contracts and unlock the suspended ones”, while beginning a “progressive and gradual” energy transition to more renewables and the democratisation of power generation.
This plan is based on a report released last December entitled Balance of hydrocarbon contracts and resources available for the Just Energy Transition, which caused controversy due to the following statement: “It is possible to infer that the contingent resources, both from the Sinú 9 block and from the offshore discoveries, can supply the national demand and, even, produce a surplus in its production until the year 2037. If we take into account the prospective resources this supply can be extended to the year 2042.” In other words, Colombia does not need new oil and gas fields
In a new report, credit ratings analysts at Moody’s Investors Services said upgrades in the oil and gas industry far outpaced downgrades in 2022, mainly because of considerable debt reduction policies at companies across the hydrocarbons value chain. Moody’s noted a similar trend in 2021.
The analysts, however, said they saw the pace of upgrades slowing in 2023, with oil and gas companies still remaining focused on maximizing shareholder distributions. Going forward, initiatives to reduce emissions would also impact cash flow at oil and gas companies, the analysts said.
“Industry cycles will continue to influence oil and gas companies’ financial performance, but we expect less robust profitability and cash flow at future cyclical peaks once these initiatives begin to change the trajectory of future oil and gas demand, and we expect cyclical troughs to be lower,” said Alam Sajjad, senior credit officer.
Robust industry conditions were particularly evident in the Americas in 2022, the analysts said. Two-thirds of the total 21 global downgrades in 2022 involved companies outside of the Americas, including 10 that resulted from the downgrade of the government of Russia.
Globally, Moody’s upgraded 31 exploration and production (E&P) companies in 2022, and downgraded only four companies. Two of the E&P downgrades, Kosmos Energy Ltd. and Tullow Oil plc, stemmed from a downgrade of the government of Ghana.
Petróleos Mexicanos, or Pemex, also received a downgrade based on a sovereign downgrade on the government of Mexico.
“The midstream sector also strengthened with the improving health of their E&P customers, with higher production volumes and reduced growth capital spending freeing up cash flow for midstream companies to reduce debt,” the analysts said.
Targa Resources Corp. and Hess Corp. became investment-grade and were deemed “rising stars” in 2022. Targa’s upgrade followed “substantial deleveraging coupled with a strengthening of its business and simplification of its capital structure,” while Hess saw “the rising maturity of its Guyana development and the visible transformation of the company’s scale and cash flow generation capacity.”
Moody’s downgraded seven investment-grade companies to speculative-grade in 2022. All of these “fallen angels” were Russian companies.
Companies that have negative outlooks entering 2023 include Colombia’s state oil and gas firm Ecopetrol SA, where there are concerns over “elevated refinancing risk and financial policies,” according to Moody’s. Colombian oil pipeline firm Oleoducto Central SA is another, a reflection of Ecopetrol’s indirect ownership of 70% of Ocensa. Ecopetrol is also Ocensa’s primary customer.
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ISSN © 2577-9877 | ISSN © 2158-8023
Related topics: NOCs
CHRISTOPHER LENTON
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chris.lenton@naturalgasintel.com
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Makes sense! Keep the faith!!
Abandon new oil and gas, that is.
Could not agree more! They will crater their economy, if they totally abandon it.
Yes, caught me by surprise when I found the article. They might see more opportunity with the current government in place.?
Companies controlled by China’s authoritarian government have been granted critical infrastructure projects in Colombia and plan to expand their influence.
The Chinese government’s increased stakes in Colombia are the result of trade deals made with Bogota between 2008 and 2019, and Beijing’s growing imperial ambitions.
Many of the projects controlled by Chinese corporations were obtained with the help of regional elites and the administration of former President Ivan Duque after a visit to his Chinese counterpart Xi Jinping in July 2019.
Since this visit, foreign direct investment from the Asian giant skyrocketed and thousands of Chinese workers traveled to Colombia allegedly to work on Chinese projects.
Bogota and Beijing have been secretive about the extent Chinese state companies gained control over Colombia’s critical infrastructure.
The Petro administration recently presented its national development plan, outlining policy priorities, primary targets, and the sources for funding the projects associated with those objectives. The plan, which should become law before May, reflects most of what Petro discussed during his campaign, particularly his emphasis on protecting Colombia’s rich biodiversity and environmental assets, as well as accelerating the energy transition by rapidly decarbonizing the economy.
However, the plan does not address Petro’s promises to forbid new contracts for exploration in the mining and oil sectors, which in the last decade accounted for 33% of total foreign direct investment and 58% of total exports. The Petro administration is betting that this main source of foreign exchange can be effectively replaced in the short term with tourism and agriculture, but this seems highly unlikely. A more gradual transition is needed.
The Petro administration recently presented its national development plan, outlining policy priorities, primary targets, and the sources for funding the projects associated with those objectives. The plan, which should become law before May, reflects most of what Petro discussed during his campaign, particularly his emphasis on protecting Colombia’s rich biodiversity and environmental assets, as well as accelerating the energy transition by rapidly decarbonizing the economy.
However, the plan does not address Petro’s promises to forbid new contracts for exploration in the mining and oil sectors, which in the last decade accounted for 33% of total foreign direct investment and 58% of total exports. The Petro administration is betting that this main source of foreign exchange can be effectively replaced in the short term with tourism and agriculture, but this seems highly unlikely. A more gradual transition is needed.