China's Setco lands Colombian gas pipeline contract

Independent gas producer Canacol has signed an agreement with Chinese engineering group Setco for the construction of a 289km pipeline in Colombia, the Canadian-based firm said on Monday. 

The Jobo-Medellín project 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 Colombia's second largest city.

“The construction of this pipeline will allow [us] to ship our gas to the interior market of Colombia and will lift our gas sales above 300Mf3/d in 2025,” Canacol CEO Charle Gamba said in a statement. 

“The project will also provide energy security to customers in the interior of Colombia as Ecopetrol's gas fields located there start declining in 2024. We are pleased to play an important role in guaranteeing a clean source of energy to our customers as Colombia executes the transition to less contaminating sources of energy.”

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

Gamba said Canacol's key selection criterion for the BOOM (build, own, operate and maintain) contract was the shipping price proposed by bidders. 

Under the terms of the deal, Setco will be required to cover 100% of the project's costs and will own, operate and maintain the pipeline.

"[Our] sole commitment ... is limited to the execution of a transportation agreement whereby [we] will pay a fixed fee for a certain volume of gas over a certain period of time," the statement said. 

Canacol has already signed two 12-year take-or-pay supply contracts totaling 75Mf3/d for gas transported by the pipeline.

According to Gamba, the firm is negotiating additional long-term take-or-pay agreements to ensure the pipeline is fully utilized at its initial capacity when commercial operations begin.

Canacol said it aims to raise production capacity at its Colombian gas fields to 300Mf3/d from the current 250Mf3/d over the next two years.