Colombia's Gas Crisis: A Looming Challenge
Colombia's natural gas market is facing a critical juncture, with its domestic reserves dwindling and the nation turning to imported LNG as a lifeline. But here's where it gets controversial: this transition is not without its complexities and potential pitfalls.
The country's domestic gas production has been on a steady decline since 2023, with an average reduction of 22% over four years. This decline is attributed to the late-life stages of legacy fields like Cusiana, Cupiagua, Chuchupa, and Ballena. Simultaneously, upstream investment has weakened, especially with the current administration's ban on new exploration contracts for oil, gas, and coal, in line with its climate agenda.
In this context, Colombia's hopes for long-term supply stability rest on the Sirius offshore project. Located in the Caribbean Sea, about 77 kilometers off the coast, Sirius is the largest gas discovery in Colombia's history. With estimated reserves of around 170 Bcm, it offers a promising solution. However, its full development is not expected until 2031, and even then, it will only support an output of around 13 MMcm/d. Until then, Colombia must rely on imported LNG to bridge the supply gap.
And this is the part most people miss: the current reliance on imported LNG is not without its challenges. The national gas market administrator, BMC, projects a significant deficit of about 5.3 MMcm/day in 2026, a sharp increase from the previous year. With domestic fields declining and exploration limited, Colombia is left with few options but to deepen its dependence on imported LNG.
Currently, imports are primarily handled by the Cartagena regasification terminal, which has been operating at near full capacity since 2023. Expansion plans to increase its capacity have faced delays, leaving the terminal stretched. Several additional LNG projects are in the works, but most won't be fully operational until the late 2020s. For instance, Ecopetrol's Coveñas terminal is scheduled to start in 2027 with an initial capacity of 3.1 MMcm/d, and the Ballena LNG terminal in La Guajira is expected to begin operations in early 2027 with a capacity of 7-8.5 MMcm/d.
The transition period will be prolonged, with new import capacity added gradually while demand continues to rise. Cartagena is likely to remain the main balancing point for most of the decade. Any mismatch between infrastructure timelines and consumption growth could lead to tighter markets and higher prices. With a significant portion of demand coming from power generation, industry, and residential users, the power sector is expected to bear the brunt of the adjustment pressures.
Pipeline imports from Venezuela could be a low-cost alternative, but they would require significant repairs and regulatory easing. Ecopetrol has urged the government to relax restrictions on Venezuelan gas purchases. However, the political climate between Colombia and the US, strained by the Trump administration's hostile stance toward Venezuela and disputes over counternarcotics cooperation, adds uncertainty to the prospect of increasing reliance on US LNG supplies.
Until new offshore supply and transmission capacity are established, Colombia's gas market will remain structurally short and vulnerable to global LNG prices. With historical domestic gas costs averaging $4-5 per MMBtu, the regional LNG prices of $9-12 per MMBtu ensure that import-linked pricing will dominate the market. Delays in upstream investment and infrastructure expansion leave little room for error, keeping the Cartagena FSRU capacity as the main system constraint. As a result, domestic prices are likely to track international benchmarks for years, deepening Colombia's dependence on US LNG imports at a time of renewed political uncertainty in US-Latin America relations.
So, what do you think? Is Colombia's transition to LNG a necessary evil, or are there alternative strategies that could mitigate the risks and challenges? We'd love to hear your thoughts in the comments below!
