Canacol advances Jobo-Medellín pipeline plans

Canacol expects to receive an environmental permit for the Jobo-Medellín pipeline project within nine months as it steps up natural gas expansion plans in Colombia, CEO Charle Gamba said on Friday. 

The comments came less than a month after the Canadian firm signed a BOOM (build, own, operate and maintain) contract for the 289km pipeline with Chinese engineering group Setco. Under the terms of the deal, Setco will be required to cover 100% of the project's costs, which have so far been assumed by Canacol.

"When the environmental permit is issued, Setco will reimburse all of the costs up until that date," Gamba said in a quarterly earnings call. "We expect that to be in August 2023."

The Jobo-Medellín pipeline is expected to be concluded in December 2024, initially transporting up to 100Mf3/d (million cubic feet a day) from natural gas fields near the Caribbean coast to Medellín, which is Colombia's second largest city.

According to permitting documents published by environmental regulator ANLA, overall investment in the project is forecast to reach 2.13tn pesos (US$434mn).

Canacol is also seeking to raise production capacity at its Colombian gas fields to 300Mf3/d from the current 250Mf3/d over the next two years.

"The pipeline ... will add 100Mf3/d, with expansion potential up to 200Mf3/d of new gas sales to the interior in late 2024, resulting in Canacol being responsible for ... up to 40% of Colombia’s domestic gas supply," the company said in an operations report. 

In the upstream segment, Canacol said it aims to complete drilling at three exploration prospects in the fourth quarter – Saxophone 1, Chimela 1 and Dividivi 1 – having already drilled nine new targets in 2022. 

VENEZUELAN GAS

Meanwhile, Canacol said it was not concerned about the possible resumption of Venezuelan gas imports via a 300,000f3/d-capacity pipeline. 

In August, energy minister Irene Vélez raised the prospect of reactivating the pipeline – which has been in disuse since 2014 – in a bid to guarantee Colombia's energy security as domestic gas reserves dwindle. 

"Most of Venezuela's gas reserves are being used for internal consumption," Gamba said, adding that there was "uncertainty" about the cost required to restore and reintegrate the pipeline.

"The [other] question is related to the price of that gas. Naturally, [Venezuelan state oil company] PDVSA and the Venezuelan government are looking at exporting gas in liquid form because prices are much higher.

"Gas prices in Europe are as high as 40 dollars [per million British thermal units]. I don't think anyone is expecting Venezuela to give away its gas and it will be closer to international prices than Colombian prices," he added.