Colombia is poised for rising energy costs due to increased reliance on imported natural gas, necessitated by declining domestic production. This shift may impose burdens on consumers, as regulatory frameworks enable energy companies to pass on costs. Significant investments in infrastructure are underway to address these challenges as the gas supply diminishes amid political and economic pressures.
Colombia is preparing for potential increases in energy costs largely attributed to a heightened dependence on imported natural gas. This change comes in response to an escalating demand coupled with diminishing domestic gas production. The regulatory framework permits energy firms to pass on additional costs to consumers; however, rising expenses may create political ramifications as they potentially strain the economy further.
Hydroelectric power currently dominates Colombia’s electricity generation, yet gas-fired electricity is crucial for baseload supply during droughts and peak demand periods. Historically, Colombia maintained self-sufficiency in natural gas; however, 2024 records indicate imports rising to nearly 20% of total consumption, driven by reduced hydroelectric output, domestic production challenges, and regional supply disbalances.
Industry experts anticipate a widening structural deficit in natural gas, with domestic production projected to fulfill only 88% of anticipated consumption in 2025 and 70% by 2026. Key transportation firms, such as Transportadora de Gas Internacional S.A. (TGI) and Promigas S.A. E.S.P., are making substantial investments in transportation infrastructure to accommodate increasing importation and enhance national connectivity.
In certain regions, retail gas prices have surged dramatically; for instance, Vanti raised prices in Bogotá by 36% in February 2025, while Empresas Públicas de Medellín (EPM) increased prices in Medellín by 21%. Other distributors like Gases del Caribe and Surtidora de Gas del Caribe have managed to stabilize supplies and moderate price shifts through access to smaller gas fields.
The depletion of Colombia’s proven gas reserves is concerning, with estimates suggesting a mere six years of supply remaining at the present production rate. This decline has been exacerbated by policy choices deterring investments in the sector. The government’s commitment to the Fossil Fuel Non-Proliferation Treaty signals a significant shift, as new oil contracts are no longer being issued since 2023.
Although gas distributors operate under a regulated tariff system allowing pass-through of supply costs, mounting energy costs present risks for working capital and could elevate political scrutiny on energy corporations. The financial stability of electricity distribution entities, already under strain due to prior regulatory restrictions and fiscal delays, may be further compromised by soaring energy prices, necessitating possible support from parent companies like EPM to subsidiary operations.
In summary, Colombia is facing an impending surge in energy costs attributable to increased reliance on imported natural gas amid declining domestic production. Regulatory mechanisms permit the transference of higher costs to consumers, yet political pressures may mount in response to growing economic strain. The depletion of natural gas reserves, combined with regulatory constraints, creates challenges for energy distribution companies, heightening the urgency for strategic investments and policy adaptations.
Original Source: www.financecolombia.com
