Colombia is anticipating rising energy costs due to a dependence on imported natural gas resulting from decreased domestic production. Major gas distributors face challenges amid escalating prices, and the regulatory environment allows for cost transfer to consumers, potentially leading to increased political pressures on the industry. Continued investments are crucial to address the natural gas deficit and support better energy infrastructure.
Colombia faces potential increases in energy costs due to a growing reliance on imported natural gas as domestic production declines. Fitch Ratings indicates that the country’s dependency shift, necessary to fulfill rising energy demands, could lead utilities to pass on costs to consumers, creating political pressure amid broader economic burdens.
The country primarily generates electricity through hydroelectric power, but gas-fired plants are crucial for baseload supply during droughts and peak demand. Despite historically self-sufficient natural gas availability, imports have reached nearly 20% by 2024 due to reduced hydroelectric production and production challenges.
Industry forecasts suggest a significant widening of the natural gas deficit, with domestic production expected to meet only 88% of anticipated consumption in 2025 and 70% in 2026. Major transport companies like TGI and Promigas are ramping up infrastructure investments to enhance gas import capabilities and support emerging onshore gas projects.
Retail gas prices are escalating; in February 2025, Vanti raised prices by 36% in Bogotá and EPM by 21% in Medellín, while some distributors have limited price hikes by utilizing smaller local gas fields.
Colombia’s natural gas reserves are dwindling, with only six years of supply projected at current production levels of 965 GBtu/day by 2025. Major producers Ecopetrol and Canacol Energy have seen declining outputs, particularly from key fields.
The reduction in domestic output, influenced by geological limits and government disincentives for investment in oil and gas, has intensified since Colombia’s commitment to the Fossil Fuel Non-Proliferation Treaty at COP28 and associated policy changes.
Gas distributors operate under a regulated tariff regime, allowing cost transfer to consumers, yet rising energy prices present increased capital demands and political challenges across the energy sector. Electricity distribution firms are struggling financially due to past restrictions on tariff increases and governmental fiscal setbacks affecting subsidy timeliness. EPM may need to support its subsidiary Afinia in response to ongoing payment difficulties.
Colombia’s energy sector is facing heightened costs due to dependency on imported natural gas and declining domestic production. Key producers struggle, while significant investments in gas transport infrastructure are necessary to cope with the growing deficit. Regulatory frameworks enable cost transfer to consumers, but increasing prices could generate political pressures. The potential impacts on the energy distribution finances may necessitate additional corporate support amid broader fiscal challenges.
Original Source: www.financecolombia.com
