22/12/2023
Ecopetrol, in collaboration with partner companies, has embarked on a significant drilling campaign in the Colombian Caribbean. The initiative aims to explore a natural gas province, with the ambitious goal of marketing the region’s first gas molecules by 2030. This project represents an important step in diversifying and expanding the country’s energy sources.
A study conducted by the data and analytics firm Rystad Energy has revealed critical aspects of the economic viability of the Gorgon and Uchuva offshore projects. According to the analysis, in a benchmark price scenario, both projects would show a negative Net Present Value (NPV). However, Gorgon would have a positive NPV of $9.1 per thousand cubic feet, and Uchuva would exceed this figure with over $13 per thousand cubic feet.
The International Institute for Sustainable Development, along with the Permanent Council for a Just Energy Transition, have emphasized in a report the need to increase energy prices for investments like these to be viable. The document indicates that higher prices could affect the country’s competitiveness, especially compared to areas where the molecule value is Us $3.
Rystad Energy, using expected gas price estimates and a nominal discount rate of 10%, projects that the NPV of Uchuva and Gorgon would be negative throughout their life cycles. This suggests that, in the most likely natural gas price scenario, these assets would not be commercially viable.
Julio César Vera, president of Xua Energy, acknowledges the alarm raised by these findings but insists on the importance of analyzing the potential of resources in the region. He argues that, once the resource level is known, the economic viability of these blocks can be more clearly understood.
The report also notes that investments in both areas are considered economically non-commercial under the negative perspectives of the main scenario. It highlights the need to build pipelines to connect the produced gas, a challenge that remains even if the Colombian government offers subsidies or tax incentives.
Villa argues that, despite high costs, having a local source of gas is preferable to depending on foreign market fluctuations. Moreover, he suggests that if the discoveries are not economically viable, it would be necessary to explore more in areas like the lower Magdalena Valley and reconsider unconventional oil field contracts.
This detailed analysis of the current situation in natural gas exploration by Ecopetrol and its allies in the Colombian Caribbean presents significant challenges, but also opens the door to new opportunities and strategies in the country’s energy sector.
The natural gas exploration campaign in the Colombian Caribbean by Ecopetrol and its allies represents a significant effort in the country’s energy diversification. However, the challenges highlighted in the economic feasibility studies underscore the need to balance profitability with environmental sustainability. Current projections suggest that adapting to market dynamics and ongoing evaluation will be crucial for the long-term success of these projects.
Facing a context of fluctuating prices and the need for substantial investments, the situation invites Colombia to innovate and seek viable alternatives. Energy exploration in the Colombian Caribbean must not only focus on immediate commercial viability but also on sustainably contributing to the country’s energy future, balancing economic interests with societal well-being and environmental health.
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