Colombia to launch regas tender in late Oct

Colombia plans to launch a tender in late October for a Pacific coast regasification terminal, but the issue of who will pay for it remains unresolved.

The 400mn cf/d (4.1bn m³/yr) facility, to be installed outside Buenaventura, will be similar in scope to an existing regasification terminal outside of Cartagena on the Atlantic coast.

Thermal power generators near the Pacific coast will likely assume most of the cost, with the balance covered by a surcharge on electricity bills, according to the director of the government's mining and energy planning unit UPME, Ricardo Ramírez.

The highly awaited tender had been expected to be launched early this year. The government now expects to select the winner in second quarter 2019, with the plant to begin operating at the end of 2023, two years later than an initial deadline of January 2021 that was set in a 4 January 2017 resolution from the mining and energy ministry.

"This tender is delayed because we are still deciding who is going to pay most of the cost of the plant, and who will benefit the most," Ramírez told Argus on the sidelines of a conference yesterday. "Most likely the assignment of costs will be made on a yearly basis."

The government will define the financing scheme over the next two months, he added.

The plant will cost somewhere between $233.8mn and $316.3mn, according to official estimates.

The project is meant to cover a natural gas supply gap beginning in 2023, UPME's long-term gas study says. "We have gas reserves for around 12 years. But production is declining, and won't be enough to cover demand. This infrastructure is necessary because new gas (reserves) will take several years to develop," Ramírez said.

The project entails a 170,000m³ onshore storage tank. A floating storage and regasification unit will be installed in an initial phase.

Colombia will need to build a 450mn cf/d, 30-inch pipeline from Buenaventura and Yumbo to supply generators in Valle del Cauca, including 205MW Termovalle and 229MW Termoemcali. The 102km gas pipeline, which will traverse the rugged western mountain range, is expected to cost around $300mn.

The LNG will give generators and gas consumers in large consumption centers such as Cali, the country's third largest city, supply flexibility, especially during the drought-inducing El Niño weather phenomenon that occurs every three to seven years.

Colombia last experienced El Niño in late 2015-early 2016. The drought depleted hydroelectric reservoirs and forced generators to use more costly fossil fuels. Thermal generators can require as much as 600mn cf/d of gas during El Niño, or 50pc more than usual, according to the country's thermal power generation association Andeg.

There is a 70pc chance that Colombia will experience another El Niño in late 2018 or early 2019.

Colombians financed the first regasification plant built in Cartagena with a surcharge on local electricity bills. The 400mn cf/d plant came on line in December 2016. Colombian gas transportation company Promigas in association with investment funds Baru Investment and TAM LNG Holdings were selected to build, manage and maintain the facility.

The plant is scheduled to receive an LNG cargo tomorrow, its fifth of 2018. Last year the plant received just two cargoes, but transmission bottlenecks increased thermal generating demand this year.