NG Energy Strives to Increase Colombia Natural Gas Production Through Development of Conventional Onshore Gas Fields

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.

As climate change becomes an increasingly urgent matter, governments and companies around the world are joining in the race to achieve carbon neutrality by 2050.

Natural gas is playing a crucial role in bridging the transition from coal and oil to renewable energy technologies. Its abundance, versatility, and tag for being the cleanest-burning hydrocarbon make it the ideal fuel to help meet growing demand for energy globally.

But not all countries have sufficient natural gas reserves. Colombia is currently in an energy crisis forced to import expensive liquified natural gas (LNG) from abroad.

One company on a mission to reduce the supply deficit of natural gas in Colombia and boost domestic production is Canadian-based exploration and production company NG Energy International Corp. GASX GASXF

Ronald Pantin, Executive Chairman of NG Energy, spoke with Benzinga regarding the company’s opportunity, latest development and key milestones.

Significance of NG Energy and Macro Factors Driving Price Premium on Nat Gas in Colombia

Colombia is in need of clean, reliable power to stimulate economic growth and meet its Paris Agreement CO2 emissions target of decreasing emissions by 51% by 2030. 

Natural gas emits between 45% and 55% lower greenhouse gas emissions than coal when used to generate electricity, according to IEA data.

It supports the integration of variable renewable electricity generation because it can quickly compensate for dips in variable supply and rapidly respond to sudden increases in demand. Natural gas is a good partner for hydropower, providing a secure electricity supply when there is insufficient rainfall.

Colombia as a whole depends on hydropower for 65% of its electricity generation. However, a water drought has caused reservoir levels to fall to an average 32% of capacity, forcing power plant operators in northern Colombia to double liquefied natural gas imports this year.

So far this year, nine shipments of LNG totaling 409,000 cubic meters have been offloaded at the Sociedad Portuaria El Cayao port and regasification facility in Cartagena. 

To make matters worse, Empresas Paoblicas de Medella­n (EPM) has revealed the Ituango hydropower project in the Cauca River, which would be the largest hydropower plant in Colombia at 2,400 Mw, could face further changes to its construction schedule as it scrambles to meet electricity supply commitments.

Pantin believes that Colombia is desperate for natural gas. However, natural gas reserves have steadily declined over the past decade and natural gas production is projected to go from 1.2 BCF per day today to 600 MCF per day over the 5 years, while demand is projected to rise to 1.6 BCF per day over the same period. That means that in the next 5 years Colombia will need 1 BCF of additional production per day for use in electricity generation, providing heat for essential industrial processes, heating homes and fueling the transport of people and goods.

Currently, Colombia has high prices for natural gas — around $5 per MMBtu — which have been sustained with low volatility evidenced by the realized gas price that Canacol Energy, Colombia’s largest independent producer of natural gas, has achieved since 2015. With the supply/demand dynamic highlighted above, the price projections given by governmental agencies in Colombia are that the price of natural gas could double in the next 5 years. 

“There is a deficit in Colombia. The country is covering the deficit with liquefied natural gas (LNG). The import price for LNG is between $8 and $10, and in 5 years, it may be between $10 and $12.” This provides a much higher ceiling for natural gas prices than the current spot market price today. 

Pantin believes that NG Energy International Corp. ((CVE: GASX, GASXF) has an excellent asset base to be developed with 1.5 TCF of natural gas in prospective resources from two of its conventional onshore blocks Maria Conchita and flagship SINU-9. Both blocks are close to the existing pipeline system in Colombia. NGE is currently building a 14 KM pipeline to tie Maria Conchita into the main TGI pipeline transporting natural gas to the country’s capital city of Bogota. Its flagship SINU-9 is 25 KM from the existing pipeline network and covered by a reliable electricity grid. As Pantin explains, proximity to existing infrastructure is extremely important as it significantly reduces the CAPEX cost of having to build long pipelines. 

Upcoming Developments and Milestones for NG Energy

To date, NG Energy re-entered 2 wells at its most advanced block Maria Conchita — the Aruchara-1 well and the Istanbul-1 well. The Company tested 30 MMSCFD across 3 zones at Aruchara-1. At Istanbul-1, the Company expects to test between 4-5 MMSCFD.

NG Energy is currently building the pipeline to tie Maria Conchita into the existing pipeline network. The pipeline is only 14 KM, expected to be completed in Q4 2021 after which NGE will start selling the gas and initiate cash flow, which spells great news for the Company.

NG Energy is also ready to commence an exploratory drill program of its most important asset — Sinu-9. The company has more than 1 TCF of prospective resources in that block. The block is neighboring Canacol, which produces 172 MMSCFD to the east.

“We can see the gas through geophysical evidence — flat spots and bright spots. The geological risk is minimal.”

“The last time we started here with Pacific Rubiales, the stock price was $0.85, and it went up to $35. This is driven by commodity price, enormous assets and we have the expertise as we’ve been doing this all our lives.”

NG energy is entering a transformation period as the company focuses on reaching first production from Maria Conchita and gears up for the first phase of exploration at Sinu-9. 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.