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Colombia's mining and energy planning unit UPME forecasts sustained demand growth for LPG in the coming years.
The fuel, however, faces a number of challenges, from gas supply uncertainty to regulatory changes, according to Camilo Gómez, director of local LPG industry association Agremgas, who spoke to BNamericas regarding these and other issues.
BNamericas: Colombia's oil association argues that under the country's current regulations, the incorporation of new proven reserves and current areas in production will be insufficient to cover natural gas demand beginning in 2021. Do you share this outlook?
Gómez: Yes, there does exist a supply risk for LPG, for two reasons.
First, because Ecopetrol, the principal producer of LPG, has not increased production levels or made new investments in developments for LPG production. Ecopetrol is using the gas they themselves produce more and more.
The second major factor is the start of a new stage of alternative uses for LPG such as vehicular gas or power generation, which until now in Colombia was not permitted. The regulations already exist and next year we will have the start of these new uses of LPG and national production won't be sufficient. It's necessary to import LPG in Colombia.
BNamericas: What about plans to build a second regasification plant?
Gómez: Gasification is for natural gas, not for propane gas. What needs to be done is a search for new deposits. Colombia has the potential, but problems with exploration have practically paralyzed new developments for oil as well as for gas.
Some problems of legal instability and the problems related with community have generated fears regarding exploration and, therefore, new Colombian sources are in difficulties.
I believe that instead of building regasification plants the government should take substantive measures to speed up the exploration of new wells onshore, not offshore.
BNamericas: I understand that the energy and gas regulator is looking at establishing guidelines for the wholesale commercialization of LPG.
Gómez: With the new changes in the sector and the entrance of new actors such as imports and the diverse alternative uses of LPG, it's not a regulation that will come out at the moment.
Authorities even have said that this regulation will be implemented once the issue of standards regarding new conditions, imports and news uses has been completed.
Furthermore, the so-called plan to guarantee supply is just being implemented. All of that has to be in place before the wholesale regulation can come about.
BNamericas: Chilean companies, such as Gasco and Lipigas, have increased their footprint in Colombia. Have you seen similar interest from companies in other countries in the region or outside the region?
Gómez: Without a doubt, there's new international interest in the LPG market, not only from Chile and Chilean companies, which today have a dominant position. But Colombians also want to gain strength in that process.
I believe that Colombian companies grouped together in Agremgás will carry out some important strengthening processes and, above all, will look for norms for transparent competition with large companies.
The interest of Colombia comes from various sides, not only from increases in residential consumption, but new markets that will open post-conflict and from the new uses.
BNamericas: How does LPG compete with the expansion of piped gas?
Gómez: Colombia has a problem, which is the asymmetric treatment between natural gas and propane gas.
The government has said that both fuels compete on their qualities and not according to subsidies. In that sense, the government first must create equal conditions for competition between the two types of gas.
BNamericas: Where do you see LPG five years from now?
Gómez: I believe we'll be in a substantially better position than today for the aforementioned reasons. To put it in a phrase, we will no longer be the Cinderella of fuels.
About Camilo Gómez
Camilo Gómez graduated from Pontificia Universidad Javeriana and is principal partner of Bogotá-based law firm Gomez & Solarte.
Previously, he was the high commissioner for peace under the presidency of Andrés Pastrana responsible for negotiating with the FARC and ELN guerrilla groups between 1998 and 2002. In 2008 the supreme court nominated Gómez as candidate for attorney general.
As a lawyer, he has advised companies in the port, health, infrastructure and gas sectors, and participated in the privatization of public service companies in various countries.
Gómez has been a visiting professor at the Salamanca and Alcalá de Henares universities in Spain, and has taught at Colombian universities Sergio Arboleda and Jorge Tadeo Lozano.