The natural gas market is growing interesting. Not in North America where prices continue to languish — but internationally, where the fall in oil has caused a knock-on drop in E&P valuations even as many gas markets are getting tighter.
News this week suggests that’s the case in northern South America. Where one nation officially announced it will become an importer of natural gas for the first time ever.
That’s Colombia. Where state oil company Ecopetrol told local press Monday that the firm has struck a groundbreaking deal to import natgas from Venezuela starting in January.
As reported by Platts, Ecopetrol’s head Juan Carlos Echeverry told reporters that Colombia will start importing 39 million cubic feet per day of natural gas from Venezuela in the new year.
The move is aimed at shoring up domestic natgas demand. Which is rising in Colombia due to increased use of gas for power generation, as hydroelectric output across the country has been falling.
At the same time, Ecopetrol’s gas production has stagnated. With output dropping 6% in the third quarter as compared the same period of 2014, to 128,900 boe/d.
The move toward imports in Colombia is important for a number reasons.
First because it shows a shift in market dynamics in this part of South America. Where Colombia used to be an important exporter — but is now flipping to being a net consumer.
That’s happening at the same time as other big markets like Brazil are also struggling with hydropower generation. And Pacific nations like Chile are rapidly increasing gas use via sources like liquefied natural gas.
There are potential exporters here — Venezuela to some degree, and also countries like Bolivia and Ecuador. Supply in these places could get tighter quickly.
It will now be critical to watch natural gas prices in Colombia — which could drive up power costs in the country (for industries like mining), but could also provide an unexpected opportunity for E&Ps here.
Here’s to reversing the flow,