NG Energy International: Fueling Colombia's Clean Energy Transition

The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

Photo by Kwon Junho on Unsplash.

A growing number of countries are making commitments to achieve carbon neutrality or “net-zero” emissions by 2050 as part of the U.N. Paris Agreement on climate change.

The term “net-zero” is becoming a global rallying cry that is a challenging yet necessary step to protect the earth. With science affirming a shrinking window of opportunity, the plan to beat carbon emissions requires urgent actions.

But, the switch from fossil fuels to clean electricity cannot happen overnight because of engineering and political challenges.

For this reason, a transition fuel is necessary.

Natural Gas as Transition Fuel for Electrification

Natural gas has long been hailed as a transition fuel from hydrocarbons to renewables. It is cheaper, safer and the least polluting among the traditional fuels used for cooking and heating — producing 50% less carbon dioxide than coal and 30% less than oil.

It is the cleanest burning and fastest-growing fossil fuel, contributing to almost one-third of total energy demand growth through the last decade globally, more than any other fuel.

By replacing coal, natural gas can positively affect the energy transition by providing uninterrupted energy and reducing annual emissions. Eventually, natural gas can be replaced by zero-emission technologies once greenhouse gas emissions are reduced to their minimum.

Colombian Gas Market Crisis

Natural gas has become an essential source of power generation, particularly on the Caribbean coast.

In an IHS Markit report released in March 2021, it revealed that the Andean countries (Colombia, Ecuador, Peru and Venezuela) would see an increase in gas demand from 54 million cubic meters per day in 2020 to 177 million cubic meters per day in 2050, an annual growth rate of 2.8%.

But, Colombia is facing an energy crisis.

The crisis results from the rise in electricity consumption, lack of reserves, declining production, weak infrastructure and the economic impact of the COVID-19 pandemic.

In April 2020, the country’s ministry of mines and energy announced that Colombia’s proven natural gas reserves at the end of 2019 were 3.16 trillion cubic feet — translating to 8 years of production. This represented a 17% decline compared to the previous year, where proven reserves totaled 3.8 trillion cubic feet with a production life of almost 10 years.

There is growing uncertainty over energy security in the country and its ability to meet its carbon dioxide emission target of 20% reduction by 2050.

Importing from North America

As a result of the growing domestic demand for natural gas, Colombia was forced to begin importing liquified natural gas (LNG) starting in 2016.

According to the U.S. Energy Information Administration (EIA), Colombia’s LNG imports during the first half of 2018 exceeded those for the previous 2 years. By May 2020, Colombia had received 9 LNG shipments compared to a total of 6 during 2019.

Natural gas producers in Colombia have contractually locked-in prices that are significantly higher than North American price benchmarks.

Canacol Energy, the largest independent natural gas exploration and production company in Colombia, reported to have locked in an average well-head sales price of $4.80 per 1,000 cubic feet (Mcf) for 2020. In Q2 2020, Canacol reported an average sales price of $4.53 per Mcf.  

Those numbers are considerably higher than the prices most North American natural gas producers receive, with less volatility, highlighting the appeal of operating in Colombia.

NG Energy’s Mission to Help Solve Colombia’s Natural Gas Crisis

With the country's declining natural gas supply in mind, it is important to identify the key players who are combatting the shortage. The largest contributor to natural gas production is state owned Ecopetrol and subsidiary Hocol, which made natural gas a strategic priority in 2020.

Canadian-based Canacol Energy CNE is the largest independent producer, producing 171.6 MMscfd in 2020 with 637 Bcf in 2P Reserves. Both Hocol and Canacol made significant discoveries this year in close proximity to a new junior entrant NG Energy International GASX. NG Energy is developing 3 highly prospective blocks located in stable and well-known areas of the country, close to national infrastructure and prolific natural gas basins.

The company’s flagship SINU-9 is a 311,353 acres block located in northern Colombia in the Lower Magdalena and San Jacinto basins, 2 of the basins with the largest gas and light oil potential in the country, and is adjacent to Canacol Energy’s main geo-production park. Canacol recently drilled Aguas Vivas 1 and hit 412 feet of payzone testing 35 MMscfd to the east of SINU-9. NG Energy is awaiting its environmental permit, expected imminently, to begin its fully funded four well exploration program with the first well, Magico-1X, expected to be spudded in September 2021.

NG Energy’s second and most advanced block is Maria Conchita, a 32,518-acre concession located in the Guajira Basin on Colombia’s Caribbean coast. The Company re-entered the Aruchara-1 well in July 2020 testing 7-11 MMscfd per zone in 3 separate zones. The Company is in the process of building a 14km pipeline to connect the Maria Conchita field to Colombia’s main natural gas pipeline system with construction expected to be completed at the end of Q3 or beginning of Q4 2021.

The Company’s third block, Tiburón, is located in elephant country with blue sky exploration potential. It is located in the same basin as Chuchupa, Colombia’s largest producing gas field, and surrounded by Orca and Perla, two of the most prolific off-shore natural gas discoveries on the Carribean Coast in recent history.

With the country’s increasing preference for clean-burning natural gas and decline in natural gas fields, NG Energy International is positioned to remain a vital part of Colombia’s gas market well into the future. 

To learn more about NG Energy, visit its website here.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.