THE FUTURE BELONGS TO GAS

Natural gas is going through unprecedented transformation stemming from technological advancement in its transportation which has led to global deployment of this energetic. Very soon its transaction will be as fluid as it is the transaction of oil, today; for it is increasingly possible to transport it from the different gas fields to the large end consumers. The global demand for generation and deployment of clean energies as well as the increasing of use of gas by oil dependent nations not having gas reserves – the market of gas was limited to countries having reserves or being able to import through gas pipelines - is steadily increasing.
It is worth mentioning the case of Venezuela – a country having great gas reserves in the east coast – not being able to take the gas to the west coast due to the high capital investments required.
Natural gas is more economical than crude oil and it is bound to become the primary source of energy within the coming twenty years. It is expected that while the global use of petroleum will grow at a expected rate of 2.3% per annum, the expected consumption of natural gas will increase at the rate of 6 to 7%.

LIQUEFACTION FINDS ITS WAY

The liquefaction of natural gas is rapidly emerging as an alternative for its economic transportation, due to recent technological advancements. Through this technology, gas is stored in liquid state and later transported to great distances between the production centers and the points of distribution for consumption. In general, the set up of projects of Liquefied Natural Gas, LNG, calls for the construction of a liquefaction plant, a port and a plant for re-gasification at the point where the product is taken.
In order to be profitable, a LNG Project requires huge investments and minimum reserves of 2 to 3 trillion cubic feet. However, according to recent achievements made in Trinidad and Osman, the cost of liquefaction was reduced to the level of US$0.90/mmmbtu and to US$0.35/mmbtu for re-gasification. Current flow of LNG in the world is concentrated for demand in Japan, USA and Europe and it presents only a marginal development in the rest of the American continent, where the only country exporting this product in our continent is Trinidad and Tobago, with a daily volume of 4,28 mm cubic meters.
However, a great expansion is expected, since 21 LNG projects are planned and/or under construction, to satisfy demand in the North American market.
Continent wide, besides USA there are plans for building ports and facilities in Mexico, Costa Rica and Dominican Republic. Another technology available for transportation of gas is the build-up of systems of Compressed Natural Gas (CNG) good enough for short distances and requiring less investments and reserves.
In contrast, the gas pipelines are a costly and inflexible alternative. On the one hand, capital requirements and operating costs are very high – even without considering the impact caused by its construction due to purchase of lands and environmental permits required -. On the other hand, in order to be feasible they must supply big enough and stable markets allowing for long term contracts, which is, of course, not required in the case of LNG’s.
For this reason, countries possessing undeveloped gas reserves are competing with each other to attract big investors having not only the capital required, but the technology and the access to markets as well.


THE COMPETITION

Colombia’s neighbouring countries are competitors and enjoy greater volume of reserves. Venezuela has great capacity to supply LNG to the region and is ranked 5th in reserves at the global scale. Trinidad and Tobago is also a strong player and it is continuously expanding its capacity to supply LNG to United States, Brazil and Central America. Peru is in the process of advancing strategies to attract private investment to develop internal consumption and exports to Brazil, Ecuador and Mexico. Argentina has consolidated a mature market, even though there is uncertainty regarding reserves. Brazil, the biggest economy in South America has ambitious plans to increase generation of electricity based on gas, and it has made new discoveries, while Bolivia advances plans –with some difficulties – to export to Brasil, Chile and Paraguay.
In the rest of the world, Katar, Indonesia, Malasia and Nigeria have been able to take advantage of its gas resources through developing projects of transportation of LNG, mainly.

COLOMBIA IS ON THE WAY
Colombia is aware of the transformations taking place around the world. Increasing internal demand and possibility to export this energetic to Central America and USA have demanded the evaluation of alternatives permitting action in the market and exploitation of the potential gas to be discovered. The main players of the market do recognize that in Colombia gas has always been assigned a secondary role after oil and taking off children’s fables, gas has always been the Cinderella in this millionaire industry. “I have always felt that gas is second to oil, despite the fact that the world is only talking about gas. We must give gas a first class passport and make transactions, since definitely gas is the future”, told the president of Ecopetrol S.A., Isaac Yanovich to representatives of the industry and of the government in the forum “The Future of Natural Gas in Colombia”, which took place in Bogota last February. On the other hand, the president of British Petroleum Colombia, Felipe Posada, recognizes that “the gas market in Colombia is still in its infancy and that there has been a lot of effort to overcome marketing and tariff restrictions” in order to zero in on projects like the plant of gas treatment. All experts were of the opinion that Colombia must consolidate a long term policy defining the future for this energetic, open the doors to private investment and generate possibilities for export business to other countries. In this sense, the representatives of oil companies expect that the Agencia Nacional de hidrocarburos (ANH) may consolidate the new contracting forms for searching of reserves and they require that the new contracts may last till full depletion of gas fields. “We need to find more gas to be able to penetrate the international market and for this reason we think this could be a good step”, says Leopoldo Montañez, president of the Asociación Colombiana de Gas Natural (Naturgas).

GUARANTEEING THE FUTURE

In order to guarantee the expansion of the market, both the government and ECOPETROL are taking measures to stimulate the presence of private capital and the execution of new projects. To this effect, the government extended the Guajira contract of association signed with ChevronTexaco in order to obtain nearly 1,000 additional gig feet in the gas fields of north Colombia. The extension of the contract went up to the economic limit of exploitation of the gas field. The fact of having fields operated in association in La Guajira, which have been exploited at competitive costs and without problems along two decades, constitutes an important asset which will serve as spearhead for future developments.
This fact, added to the political and economic stability of the country permits obtaining an important position in order to attract foreign investment keeping an edge other competitors in the region. Expanding the gas offer would permit materializing the exports of gas to Venezuela. Currently, the governments of the two countries are advancing conversations to evaluate the feasibility of transporting between 150 and 250 million cubic feet per day through a gas pipeline 200 km long connecting the Colombian Guajira and Maracaibo.
For the interior of the country, ECOPETROL is advancing negotiations with the partners of the association Santiago de Atalayas (British Petroleum and Tepma) to increase the installed capacity in Cusiana and build a plant to reach a total processing capacity of 180 million cubic feet of gas per day, to take care of demand in the departments located inside the country. Besides, we must consider that after its transformation into a public company by shares, Ecopetrol can now sign joint-venture contracts with the investors, which will facilitate the search for new reserves. “I firmly believe in the future of gas. This commits us - within our new role - to take initiatives to reactivate the exploratory activity in our seas. For this reason we have taken actions such as duplicating our budget for investment in exploration”, pointed out the president of Ecopetrol at the time of formulating the projects being advanced in the Caribbean coast.

BIG PROJECTS

For year 2003 Ecopetrol decided to enter directly in offshore exploration. For this reason, it requested 3 blocks: Bahía, Jarara and Tayrona, where there are fields with estimated reserves that would require millionaire investments. The blocks are located in a privileged geographical position (in between Santa Marta and La Guajira) which will allow the country to have a competitive edge in regards to cost of transportation due to the vicinity of the markets of the Gulf Coast and the Caribbean. The exploration started last year, with the execution of 300 km of 3D seismic in the block of Bahia. This activity will serve the purpose of collecting information on the potential for the area and will act as leverage at the time of looking for strategic partners in the development of the project. So far, about 12 leads have been identified, some of them with estimates of more than 6 cubic terafeet of gas, leads between 2 and 4 teras and leads between 0.5 and 1.5 teras, hich confirms the appeal of the zone. “We expect to complete within 26 months a study of the off shore area in order to continue with the drilling activities.
We want to minimize risks and look for the best technology”, pointed out the vice resident of Exploration of the company, Pedro Restrepo Pace, who is convinced that the future of the market of natural gas is in the Atlantic coast. So far there has been an investment of about US$10 million. The information collected will allow Ecopetrol to go out and look for partners who may contribute with capital resources and technology, thereby permitting diversification of the risk.
The simultaneous exploration of several blocks and prospects to share the cost of equipment and learning from the accumulated experiences will provide Ecopetrol the opportunity to obtain scale economies.
The gas exploratory prospects offshore in Colombian waters have the required potential to make feasible projects of LNG and CNG and the export to the markets in Central America, the Caribbean and the East Coast of the United States. Everyone in the world talks about gas, today. In Colombia we are taking the first steps to insure growth, cross borders and expand the market.