COLOMBIA: Incentives in USD to accelerate the Pacific regasification plant

Planta de regasificación en el pacífico Colombia
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According to BNAméricas, financial incentives would be offered to investors to accelerate the development of Colombia’s US $ 700mn Pacific LNG import project, to avoid an imminent natural gas shortage. << Initially considered for the port of Buenaventura in the department of Valle del Cauca, the new regasification infrastructure would have a capacity of 400 Mcf / d and would store 170,000m3 of natural gas. The initiative also includes an associated pipeline that would connect the import terminal with Yumbo, on the northern periphery of Cali.

UPME director Christian Jaramillo mentioned during his participation in the Colombian Investment Summit on Friday that a bidding process would probably be launched “in the next two weeks” and would end in the first quarter of next year.

“We are in the last phase of a discussion related to the [operational] start date,” Jaramillo said during the online event. “We will provide incentives for early entry into operation. There will be additional revenue. And it will be regulated, which means there will be no risk to the investor.”

Jaramillo did not provide details on the additional payments or where they would come from.

Leverage risk by incentives in Dollars

The government had reconsidered the construction schedule and estimated that the project would come into operation “four or five years after the contract was awarded.”

Officials previously predicted an operational start in early 2024, when the government also expects demand for Colombian gas to exceed supply from existing sources.

Jaramillo said that up to 42% of the project’s remuneration could be in US dollars, reducing investors’ exposure to currency risks.

He also provided additional details on the gas pipeline, which will transport gas to buyers in Cali and other neighboring areas.

According to Jaramillo, the pipeline will have a 30-inch diameter and a length of 110km, crossing the Western Cordillera, the westernmost flank of the Colombian Andes.

Among the companies that have expressed interest in the tender are TGI, a subsidiary of Grupo Energía Bogotá (GEB), and Promigas, based in Barranquilla, which has a majority stake in the only existing LNG import terminal in Colombia: the facility of Sociedad Portuaria el Cayao (SPEC) in the Caribbean.

GEB executive president Juan Ricardo Ortega told BNamericas last week that TGI would only consider an offer if measures were taken to mitigate risks for investors, such as the threat of delays related to community opposition.

During a public consultation for the draft terms of reference, the companies expressed doubts about who would bear the cost of the project and how. In addition, local producers have warned that they could be left without a market for their gas.

Editorial: On the downside

Experts conclude that Colombia has a sub-utilized regeneration plant in the Caribbean that, with the actual coverage of the natural gas production pipeline, will be located near the Colombian Pacific. Finally, the investment will be paid by all of Colombia’s gas users, which includes the dollar incentives.

Many ensure that the Projects of the Miner Energética Planning Unit (UPME) that project GNL’s estimates in Colombia do not adjust the maximum capacity of natural gas production on demand, the manner in which the adjustment is made, the cross between the offer and the demand are posted more than once. This is the GNL escalation supposition.

Not having a reliable forecast of production capacity might end up making the natural gas users finance an unnecessary investment project financed by private capital. Consequently, making us poorer. A more appropriate investment would be to increase the GNL’s connection and reach within the Colombian households so that the Caribbean regasification plant can be summoned to the LNG needs.

 

Source bnamerica La Republica

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