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CONVERTING TO GAS, A SAFE BET

The manufacturing plants of Leona, Alpina and Colceramica located at municipalities neighbouring Bogota are currently getting ready their installations and boilers to operate using natural gas, much the same as about 700 companies of the Sabana de Bogota are already doing. Last August were reported more than 800 vehicle conversions to natural gas in Bogota, which for the first time permitted realizing more than 2000 installations per month in the country. And the city now has more than one million homes connected to the domiciliary networks, accounting for almost one third of the total users in Colombia.
In the meantime, 120 kilometers away from the capital city, at the Cusiana-Cupiagua complex in Casanare it currently advances the construction of a gas treatment plant which will make available more than 180 million cubic feet of gas per day from one of the greater national reserves of this fuel.
Although apparently are two non related events, the fact is that the wave of conversions by consumers in Bogota and in the so called “interior of the country” (the national territory south of Vasconia) is possible thanks to the existence of the Cusiana-Cupiagua reserves, since the start up of a new plant by the end of 2005 will make available this resource to meet current demand and future developments in the industrial, thermal, vehicles and domiciliary sectors.“Cusiana enables us to having continuous supply towards the interior of the country in order to properly fulfil commitments. This adds to supply from La Guajira, so far the main source and located more than 500 kilometers away from the consumption centres”, states Claudia Castellanos, manager of Gas de Ecopetrol. Robert Child, manager of New Gas Businesses at BP (partner of Ecopetrol and Tepma in the construction of the gas plant) highlights that the availability of the Cusiana gas is a “signal of confidence for all consumers” who are now sure of counting on a low cost fuel for the next twenty years. But Cusiana’s gas is not only important on account of volume of reserves and geographical location. It is also important because starting production in such facilities will render viable some export projects, as pointed out by Claudia Alonso, manager of New Businesses of Ecopetrol who is of the opinion that by covering a good portion of local demand with gas coming from such fields, gas from La Guajira would be freed for projects such as the gas line to Venezuela, for which there is already a memorandum of understanding between the governments of both countries and a team for definition of the technical, commercial and legal aspects of this project has been conformed.
Besides, the experts share the opinion that the entry of Cusiana will wipe out the fear of possible limitations in the transportation of gas from La Guajira to the interior –with a maximum capacity of 200 million cubic feet per day- which could be insufficient within a few years to take care of demand at the interior of the country, specially in the event that massive thermal plants may be required to generate electricity in this part of the country.

FROM PETROLEUM TO GAS

Cusiana and Cupiagua have been historically considered as two of the main petroleum discoveries in Colombia, with joint reserves of 1,300 million barrels. Discovery of these fields and their development during the nineties attaining a peak of production of 400,000 barrels per day left their mark in the petroleum history of the country of the last years, specially, the history of one of the more active basins, the Llanos Foothills.
What some people have not realized is that there it was found not just oil, but a significant volume of gas is also present. Such gas is labelled as “associated” since it exists in a mixture with liquid petroleum. Historically, gas has been re-injected to the field to increase extraction of oil.
Just to show the potential gas production of these fields it should be remembered – as Child points out – that currently production of gas amount to 3 million cubic feet per day, which is equivalent to five times the amount consumed the whole country. This gas, which greatest proportion returns to the field through a re-injection system, has several components which must be extracted before it can be transported and meet with the required specifications. And this will basically be the function of the plant under construction.
During the nineties there existed few attractions for development of gas, namely, low demand, some regulating inconveniencies and black oil losses affecting oil production for lack of gas injection to foster production.
However, the situation has changed over the last years. Declination of oil production in Cusiana, increase of consumption at the interior and clarity in regards to price, not to mention the rapidly gaining importance of gas in the international context, plus new technological advances for its use, drastically changed this story, and now it is attractive to dig up the so called fuel of the future.

A PLANT TO GROW UPON

The Cusiana gas plant has an estimated cost of US$100 million and it is being built through a joint venture contract where Ecopetrol participates with 60%, BP has 24.8% and Tepma has 15.2%. This is by no means the first plant ever built in Casanare, even though it is the largest. Ever since the nineties Ecopetrol has in operation a plant with capacity of 20 million cubic feet per day (MMscf/d) and there is still another with previous capacity of 40 MMscf/d which has been enlarged to 68 MMscf/d. The Project consists of extending this last plant to production even above 200 MMscf/d which require some adjustments in the transportation infrastructure. Businesses popped up very quickly, as can be confirmed by the fact that the partners in the project have already subscribed a first contract to supply 90 Giga BTU per day (GBTUD) to the company Gas Natural which distributes gas in Bogota. The above is even more relevant since according to data from Ecopetrol gas consumption for Bogota and neighbouring towns is now reaching 70 MMscf/d while Cali and the western region consume close to 40 MMscf/d. This means that Cusiana’s gas production can easily meet a total demand of 150 MMscf/d for the interior of the country.
In estimating the meaning of the start of production of the plant in 2005, technicians coincide in stating that offer of gas will surpass demand. Additionally, greater investments contemplated at La Guajira through the extension of the association contract, will permit retrieving one (1) additional TCF from the fields in that department.

CURRENT OPTIONS

The portfolio of alternatives to increase demand for gas go from making aggressive campaigns to speed up consumption of vehicle gas to development of petrochemical projects based on production from Cusiana and definition of projects for export of gas from La Guajira to Venezuela.
“We have plenty of gas and we are going to commercialize it”, says Castellanos. She says that Ecopetrol must intensify marketing of gas looking for new uses and it also must increase consumption by current users. Options include a market which -even though it does not represent a major portion of actual consumption - has a great potential for growth: the vehicle natural gas. This year the Colombians will consume close to 22 MMscf/d in more than 43,000 vehicles already converted. During 2004 20,000 more vehicles will be converted - mainly public service and small cars– However, such figures could double next year according to the potential of the market.
Economic advantages over gasoline, the current policy of dismantling subsidies by the national government plus the environmental advantages of a “clean” fuel have pushed Colombia to join the world tendency towards use of natural gas for transportation. Examples like Brazil, where 200,000 vehicles are converted per year, or Argentina, where 1.2 million vehicles fuelled by natural gas are now running, show that Colombia has a long way to go in this area.
The above is reinforced by a measure to become effective next year, which will force great consumers to buy diesel at international prices. For the experts this means that massive transportation systems such as some due to operate in some cities of the country will look for cheaper fuel and more friendly to the environment.
The domiciliary consumption can also be increased, despite the massive plan of the last decade which led to high coverage of Bogota and coastal cities. However, in other markets such as Cali and Medellin there is ample space to continue enlarging the distribution networks and connecting more users.
The Gas department of Ecopetrol also highlights the increase which could be achieved in the industrial sector by substituting other fuels like diesel and heavy crude, as it is being made by other companies in the country.

GAS FOR EVERYTHING

Not just the conventional options are on the table. There are also some which have been subject to a lesser development. Among them stand out, for example, some initiatives like the so called “cogeneration” , a technology allowing for production of two types of energy from the same fuel.
Cartones de America, a company located at the Valle del Cauca started out on a process in this field intended to optimize its energy cost, using gas for generation of electricity and taking advantage of the steam generated, for other processes. The result is an increase of 50% in demand o gas for such company.
Another great pusher of demand is exports, as pointed out by the president of Naturgas, Leopoldo Montañez. The most advanced project in this field is the gas line between the fields of La Guajira and Maracaibo.
According to Claudia Alonso, this project would call for approximately 150 MMscf/d of gas from La Guajira, through a gas line about 200 km long which construction would cost close to US$130 million.
The executive in charge of new businesses at Ecopetrol points out that the feasibility of this business as well as the possibility of reviving others as the Iron and Steel plant with Brazil are a direct consequence of the greater availability of gas from Cusiana, as well as of greater investments in La Guajira which are considered for the next few years.
In regards to other options for the future, it is still in the draft table the possibility of exports to Panama whether through a gas line or through a system known as “gas by cable”, namely, the sale of electricity from a thermoelectric plant operated by gas. Even the set up of compressed natural gas for export from the coastal area could be contemplated, according to Naturgas.

GASEOUS DREAMS

The world situation of natural gas which is emerging as a transactional good having the greatest growth in demand within the group of primary fuels, requires that Colombia not only may define the use of its gas surplus, but also may engage in fostering of activities that may align our country with those countries which are engaging in development and financing of this fuel. The available figures show that Colombia currently does not have enough reserves to engage, for example, in a project for production of LNG, a technology that allows for transportation at long distances and which calls for from 5 to 6 TCF available in the same place. A report by the Energy Information Administration shows that the growth of this market is rapidly developing in the world, that costs have fallen sharply and that seven countries are currently planning on building liquefying plants, among which are Venezuela, Bolivia and Peru.
Even though for the experts currently there are no proven reserves to take up a project like this in Colombia, everyone acknowledges the work of Ecopetrol to encourage exploration of this hydrocarbon, including acquisition of 3D seismic in an area where, according to geologists, there is great potential for finding natural gas in the Caribbean basin, not to tell the possible presence of liquid hydrocarbons.
Let us not forget that gas reserves continue to increase through new discoveries. Such is the case of Gibraltar, where extensive testing showed that among other products it was detected the presence of at least 630 BCF in what is known as the new exploratory frontier of the country.

ENRICHED PRODUCT

While reactivation of exploration consolidates, as a result of a more aggressive attitude on the part of Ecopetrol, the country must define in the short range what to do with the proven gas reserves and its best use.
Besides options considered for the industrial, domiciliary, vehicle, thermal and exports, the Cusiana gas, due to its chemical composition which qualify this as a “rich” gas, permits other non conventional uses.
Unlike other gases basically composed of methane, Cusiana’s gas has 11% ethane and anywhere between 5% and 6% propane.
Using simple language, the Cusiana gas has elements which can be extracted and used as raw material for the petrochemical industry and as liquid fuels such as diesel. Taking advantage of such components would allow for generating added value form the gas, as Child states. He indicates that burning such gas in a stove in Bogota would mean burning products which can be used in other industries.
The most meaningful components of the gas extracted from Cusiana are ethane, which is the base for producing ethylene and which at the end may generate polyethylene; methane, out of which the “synthetic crude” is obtained and can generate ACPM (diesel) using technologies and plants known as “gas to liquids”. Equally, propane, which is the LPG delivered in cylinders and which can generate propylene (see graphic). Some of these compounds - principal raw materials in the chain of plastics - would allow for development of a petrochemical complex in the country, according to BP´s manager of New Businesses. The advantage of this alternative is that new investments could be attracted to produce some raw materials that currently are imported.
The technology for producing diesel from rich gas from Cusiana is also a possibility if a technology developed during Second World War is used. This option is now interesting in the light of the increase of consumption of diesel in the country and given the limitations of refineries to increase current production, plus the added advantage of producing “clean” diesel from gas.
All options are now on the table; and all they start from a plain and true fact: currently Colombia has enough gas reserves to give a boost to consumption of gas, and there is a plant under construction which will bring greater availability within a year. Such situation assures Colombians, from tax owners to businessmen, that it is safe turning to a fuel that is no longer the fuel of the future, but a nice reality for the energy sectors in the country.