Colombia Faces Rising Energy Costs Due to Expanding Natural Gas Deficit
Colombia is expected to face rising energy costs due to increased reliance on imported natural gas amid declining domestic production. Fitch Ratings indicates that while regulatory frameworks allow cost transfers to consumers, political pressures may grow. The country’s gas shortage is projected to expand, prompting major investments in infrastructure by leading gas transporters. Retail prices have surged, and proven reserves are depleting rapidly, leading to critical challenges in the energy sector.
Colombia is preparing for escalating energy costs attributed to a heightened dependence on imported natural gas, as domestic production continues to decline. Fitch Ratings suggests that this adaptation is necessary to satisfy the increasing demand. Although energy firms can transfer these additional costs to consumers, the economic strain may intensify political pressures against rising energy prices.
Hydroelectric power remains the primary source for Colombia’s electricity generation; however, gas-fired electricity is critical for maintaining a stable supply during periods of drought and peak demand. Historically self-sufficient in natural gas, Colombia’s imports surged to nearly 20% of consumption in 2024 as a result of reduced hydroelectric generation, challenges in domestic gas production, and geographical inconsistencies.
Industry experts warn that the natural gas deficit will continue to grow, as production capacity is projected to meet only 88% of consumption needs in 2025 and drop to 70% in 2026. Colombia’s leading gas transporters, namely Transportadora de Gas Internacional S.A. ESP and Promigas S.A. E.S.P., are significantly investing in infrastructure to accommodate increasing gas imports and enhance connectivity for new onshore gas initiatives.
Retail gas prices have markedly increased across various regions. Specifically, in February 2025, Vanti imposed a 36% increase in Bogotá, with Empresas Públicas de Medellín following suit with a 21% rise in Medellín. Other distributors like Gases del Caribe and Surtidora de Gas del Caribe have managed to stabilize their prices, leveraging access to local gas fields in northern and southwestern regions.
Colombia is facing a decline in proven gas reserves, which are expected to last only six more years at the current production rate of 965 gigabritish thermal units (GBtu) per day. Two dominant producers, Ecopetrol S.A. and Canacol Energy Ltd., have seen reductions in their output, particularly from the crucial Cusiana, Cupiagua, and La Guajira fields, which dropped from 550 to 425 GBtu per day within a year.
This drop in domestic production, partly due to geological limitations, has been exacerbated by government policies dissuading investments in the oil and gas sectors. Notably, Colombia has emerged as the first country in Latin America to sign the Fossil Fuel Non-Proliferation Treaty and intends to cease issuing new oil drilling contracts.
Gas distributors operate under a regulated tariffs system that allows them to shift supply costs to consumers. Nonetheless, the rising energy expenditures could strain their working capital and provoke political pushback across the energy sector. Despite the existing regulatory measures, Colombia’s electricity distributors are experiencing financial hardships due to soaring prices and political involvement, exacerbated by imposed tariff increase limitations since the pandemic and the government’s fiscal difficulties, which have led to delays in subsidy disbursements.
Colombia is confronting a growing energy crisis characterized by a reliance on imported natural gas amid declining domestic production. The increasing energy costs have serious implications for consumers and the economy, facing potential political backlash. Despite challenges, gas transporters are making efforts to enhance infrastructure for imports while navigating regulatory environments. The situation necessitates careful monitoring as energy stakeholders manage costs and political pressures.
Original Source: www.financecolombia.com
