NATURAL GAS IN COLOMBIA

NATURAL GAS IN COLOMBIA Diana Alejandra Franco Díaz 317816 January 30, 2009 30.01.2009 Natural Gas 1

15 years since the Natural Gas Mass Consumption Plan started Colombia is the 7th country in the world with more vehicles NGV (3rd in Latin America). Colombia faces a problem of natural gas supply in the short term. 30.01.2009 Natural Gas 2

Content About Colombia Historical development of natural gas in Colombia The Structure The Gas Market What about the future? Conclusions 30.01.2009 Natural Gas 3

About Colombia 30.01.2009 Natural Gas 4

About Colombia Bogotá Officially: The Republic of Colombia Population: 44 087.000 (estimate at 2008) Total area: 2 070.408 km2, where 1 141.748 km2 are continental area Capital and largest city: Bogotá GDP (Nominal): 202.630 million USD/year Per capita: 4.264 USD/ year 30.01.2009 Natural Gas 5

Historical Development of Natural Gas 30.01.2009 Natural Gas 6

Source: UPME 70`s : Beginnings (1970 1989) First Gas Pipeline Ballena Barranquilla- Cartagena.. 1977: First residential users. 1978: Pipeline Dina Neiva. Oil and Gas are discovered in Apiay (Meta) 80`s : 1986: First energy policy: "Natural gas for change 1988: First pipeline to Bogotá. Apiay-Villavicencio-Bogotá 1989: Cusiana is discovered 30.01.2009 Natural Gas 7

Developing the structure (1990 2003) 1993 1994 1995-1997 Natural Gas Mass Consumption Plan: It defines guidelines in order that Ecopetrol leads the main network construction and for the development of the regulatory frame of the industry. Law 142: It defines the legal framework for domiciliary public services. The Regulatory Commission of Energy and Gas (CREG) is created. - Ecopetrol connects major fields with the places of consumption (more than 2000Km). - The Colombian Company of Gas (ECOGAS) is created and Ecopetrol stops assuming the responsibility of executing the Mass Consumption Plan in a centralized form. 1997 Begins the process of privatization of gas companies. 2003 The National Hydrocarbons Agency (ANH) is stablished 30.01.2009 Natural Gas 8

4 611.866 Users. 40% of the total population. NG is present in 22 of the 32 departments of Colombia. 6100 Km of the Colombian gas transportation network. Capitalization of Ecopetrol (Sale of 20% of Shares). Alienation of Ecogas to TGI S.A. ESP. At the end of 2007 30.01.2009 Natural Gas 9

The Structure Production Transporters 30.01.2009 Natural Gas 10

The Structure Today Explorers (over 44) Distributors (over 23) Residential NGV Industrial Thermoelectricity Producers (12) Transporters (8) 30.01.2009 Natural Gas 11

TJD 500 400 300 200 100 0 497 Production Tera Joule per Day (10^12) 52 71 7 Natural gas supply by region 493 84 72 5 493 129 2003 2004 2005 2006 2007 74 4 474 204 85 6 493 236 68 4 Guajira Cusiana Center Güepajé Guajira - 62% (non associated gas) ChevronTexaco Ecopetrol Regulated Prices (associated to oil price) = 4,98 USD/MBTU (4,72USD/GJ) August 08 January 09 Data source: UPME Cusiana 30% (associated to oil production) BP Ecopetrol Free Prices (with CREG supervision) = Auction: 3,71 6,02 USD/ MBTU (3,52-5,71USD/GJ) Data source: Ecopetrol 30.01.2009 Natural Gas 12

Transporters TGI (97,91% of EEB) 3702Km PROMIGAS ( 52,1% of AEI) 2039Km 94% Source: EEB 30.01.2009 Natural Gas 13

The Gas Market Reserves Production Consumption 30.01.2009 Natural Gas 14

250 200 150 100 Cusiana, Cupiagüa Proved Reserves Billion cubic meter (10^9) Developed/ non developed 50 250 200 150 100 50 0 0 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 188,05 100% 1999 2000 203,60 73% 27% Total 2000 Developed Non developed 2000-1999 203,60 128,53 75,07 15,55 100% 73% 27% 8% more 30.01.2009 Natural Gas Data source: UPME 15 Bcm %

Production Billion cubic meter (10^9) 1996-1997 The West Pipeline entered in operation 99 Recession 2003: Cusiana increased its capacity with Cusiana III 8,0 7,5 7,0 6,5 6,0 5,5 5,0 4,5 4,0 3,5 3,0 Guajira increased its capacity with Chuchupa II 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 Data source: UPME, BP 30.01.2009 Natural Gas 16

1000 800 600 400 200 0 631 Consumption by sector 671 Tera Joule per Day (10^12) 2003 2004 2005 2006 2007 2008 Data source: UPME 732 803 854 940 Natural gas vehicle Residential Petrochemistry Ecopetrol Industry % by sector - 2008 Thermoelectricity In the last years the industrial consumption and the natural gas vehicle have boosted the internal market, also in the residential sector the growth has been important. NGV Residential PC Ecopetrol Industry TE 9% 17% 2% 11% 41% 20% 30.01.2009 Natural Gas 17

Natural Gas Vehicle 400 VAT exemption for kits Regulation of technical standards Release in fuel prices 250.000 350 300 200.000 Filling EDS Stations 250 200 150 Birth and development Growth 150.000 100.000 Vehicles Vehículos 100 50.000 50 0 1.986 1.988 1.990 1.992 1.994 1.996 1.998 2.000 2.002 2.004 2.006 FS EDS Conv. Cumulative Acum conversion 0 Source: Gazel 2008 30.01.2009 Natural Gas 18

Gasoline: 7648 $*/gal 0,90 USD/liter A vehicle can travel about 11 Km/liter Of gasoline, which leads to a ratio of: 0,082 USD/ Km Natural Gas Vehicle Prices in Bogotá Fuel subsidies (%) 2% 2% 3% 5% 7% 46% 49% 54% 53% 54% NGV: 1392 $*/m3 0,62 USD/m3 A vehicle can travel about 12,43 Km/m3 of NGV, which leads to a ratio of: 0,050 USD/ Km 52% 48% 42% 42% 39% 2003 2004 2005 2006 2007 Gasolinas Diesel GNV Source: Gazel *1 USD = $ 2245, 28 (Colombian Pesos) (@ 21.01.2009) 30.01.2009 Natural Gas 19

What about the future? 30.01.2009 Natural Gas 20

GBTUd 1.600 1.400 1.200 1.000 GBTUd 800 600 400 200 0 2008 1.600 1.400 1.200 1.000 800 600 400 200 0 2009 Balance P10, con importaciones en la base 2010 2011 2012 2013 2014 Interior La Creciente Guajira Importación 1.400 Demanda 1.200 2008 2009 2015 2016 2017 Balance P90, con importaciones en la base 2010 2011 2012 2013 2014 Interior La Creciente Guajira Importación Demanda 2015 2016 2017 2018 2018 2019 2019 2020 2020 GBTUd 1.600 1.000 800 600 400 200 0 2008 Forecast Source: UPME 30.01.2009 Natural Gas 21 2009 Balance P50, con importaciones en la base 2010 2011 2012 2013 2014 Interior La Creciente Guajira Importación Demanda 2015 2016 2017 2018 2019 2020 1 GBTUD = 1,055 TJD

Options Short Term: - Increase self production - Imports from Venezuela: contracts with clauses are required to respect strict penalties for failure to deliver agreed. Long term: - Gas storage: Cover the peak consumption, however is not the solution to the problem of shortage. - LNG - gasification plant: It requires guarantees for the use of close to 100% capacity to be economically viable. - Energy integration. 30.01.2009 Natural Gas 22

Interconnection Node Ecopetrol Chevron- Pdvsa 1. Exports to Venezuela (MCMD) 2008: 1,4 2009/10: 4,2 2011: 2,8 2. Imports from Venezuela 2012 2027: Beggins with 0,5 MCMD Source: MME 30.01.2009 Natural Gas 23

Conclusions Since the Natural Gas Mass Consumption Plan started, the natural gas has increased its participation in the energy market from 6.8% in 1998 to 16.8% in 2007 and will continue to growing. The structure of the industry is concentrated: 2 major producers and 2 large transporters. Reliability in providing the service highly dependent on events in transport and production. The market is concentrated in a few regions. It is required to find new fields and expand the production capacity of existing ones. It is required to strengthen the infrastructure of natural gas transmission, storage and development of import facilities. 30.01.2009 Natural Gas 24

THANK YOU FOR YOUR ATTENTION 30.01.2009 Natural Gas 25

References: British Petroleum. Statistical Review of World Energy 2008. Available online at: http://www.bp.com Colombia. In Wikipedia, The Free Encyclopedia.,from http://en.wikipedia.org/w/index.php?title=colombia&oldid=249558274 Comisión de Regulación de Energía y Gas CREG. Official web site: http://www.creg.gov.co/html/i_portals/index.php Ecopetrol. Official web site: http://www.ecopetrol.com.co/ El Mercado del gas natural en Colombia. Quito Ecuador. June 2000. Available online at: http://race.nuca.ie.ufrj.br/paperarquivo/fbaduen1.pdf Empresa Colombiana de Gas (ECOGAS). Official web site: http://www.ecogas.com.co/default.asp Empresa de energía de Bogotá S.A. ESP (EEB S.A ESP). Official Web site: http://www.eeb.com.co/ Gazel Colombia. Official Web Site: http://www.gazel.com.co/wps/wcm/connect/gazel/colombia Kozulj Roberto, (2007). El abastecimiento de gas natural en Colombia: confiabilidad, alternativas de suministro y posibles impactos sobre la política energética. Observatorio Colombiano de Energía, Publication No. 28. Colombia. Available online at: http://www.cid.unal.edu.co/cid/archivos/observatorios/energia/b28.pdf 30.01.2009 Natural Gas 26

References: Ministerio de Minas y Energía (Minminas MME). Memorias al Congreso 2004 2008. Available online at: http://www.minminas.gov.co/minminas/index.jsp?cargahome=3&id_categoria=44&i d_subcategoria=496 Ministerio de Minas y Energía (Minminas) UPME. 2007. Plan Energético Nacional. Contexto y Estrategias 2006-2025. Bogotá, Colombia. Available online at: http://www.siel.gov.co/default.aspx?tabid=83 ------- Boletín Estadístico, de Minas y Energía 2002-2007. Bogotá, Colombia. Available online at: http://www.upme.gov.co/docs/boletin_estadistico_2007.pdf ------- 2008. Boletín Estadístico, de Minas y Energía 2003-2008. Bogotá, Colombia. Available online at: http://www.upme.gov.co/docs/boletin_estad_minas_energy_2003_2008.pdf Ministerio de Minas y Energía. 2008. Official Web site: http://www.minminas.gov.co/minminas/ Naturgas. Congreso Anual de Naturgas 2008. Available online at: http://www.naturgas.com.co/ Naturgas. Disponibilidad futura del gas en Colombia, Balance Probabilístico de Gas Natural 2008 2020. October 2008. Available online at: http://www.naturgas.com.co/ Ospina Eduardo. Plan de Masificación del Gas: evaluación y Perspectivas. 2002 Available online at: http://www.contraloriagen.gov.co:8081/internet/central_doc/archivos/108/08_plan %20de%20masificacion%20del%20gas%20evaluacion%20y%20perspectivas.pdf 30.01.2009 Natural Gas 27

References: Promigas S.A ESP. Official Web site: http://www.promigas.com/wps/wcm/connect/promigas/inicio Transportadora de gas del interior S.A. ESP (TGI S.A. ESP). Official web site: http://www.tgi.com.co/ Unidad de Planeación Minero-Energética (UPME). Official Web site:www.upme.gov.co 30.01.2009 Natural Gas 28