The details behind Colombia's US$4bn LNG-to-power plans

Bnamericas Published: Wednesday, May 20, 2020
The details behind Colombia's US$4bn LNG-to-power plans

A 15.72tn-peso (US$4bn) gas-to-power complex slated for Colombia's Caribbean coast will transform the underprivileged province of Sucre into one of Latin America's most important industrial hubs, its governor told BNamericas.

Héctor Olimpo Espinosa, a 38-year-old former deputy interior minister who became Sucre's highest-ranking official in January, said the initiative would dynamize a region seeking a fresh start following the 2016 peace deal that ended Colombia's 53-year civil conflict.

"I am doing everything possible to ensure that the project goes ahead and benefits the entire province of Sucre as well as Colombia," Espinosa said in a telephone interview. "We have to attract private investment to boost the local economy."

Earmarked for a 10,000ha site near the town of San Onofre, around 100km south of the tourist mecca of Cartagena, the combined-cycle power complex will boast installed capacity of 3,693MW when fully completed in late 2022. 

The project includes an offshore floating liquified natural gas (LNG) terminal and storage unit that will be connected via pipeline to a vaporization plant, which will initially regasify 36,288m3/d (1.28Mf3/d).

The project blueprint also includes a natural gas metering station, a continuous electrodeionization (CEDI) water purification unit and an associated 500kV power transmission system. 

Project developer Generación e Interconexión Eléctrica del Pacífico (GIEP) started the environmental licensing process in March and is currently carrying out preliminary activities to pave the way for the launch of construction and civil engineering works in January. 

"There are legal and environmental issues, but I think this year these barriers will be overcome," said Espinosa, adding that the knock-on effects for the Caribbean region would be far-reaching.

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"It's not just about the energy facility. There is the whole value chain that stems from it, such as agricultural businesses and industrial sectors that can use this energy. There is also a range of social projects that will bring benefits to communities and generate employment, especially for vulnerable members of the population," he said.

Sources told BNamericas that the complex would be fully financed by private capital. Contracts for engineering services and equipment providers are only being awarded to companies that agree to purchase an equity stake in the project.  

Online in 2021

The first two thermoelectric plants – with respective installed capacity of 1.231GW – are expected to begin generating electricity between December 2021 and February 2022. Each plant will comprise three turbines – two fired by gas one by steam. A second stage will see a third 1.231GW plant come online in December 2022.

GIEP is also planning to complete the first 90km section of a 500kV transmission system, including a gas-insulated substation, in 2021 or 2022.

Investment is seen reaching US$2.17bn in the first stage and US$1.08bn in the second. The project is expected to create 3,700 jobs: 1,200 direct and 2,500 indirect. 

In addition, the developer aims to tap the European Union's sustainable development bonds program to invest US$250mn in reintegration projects resulting from the peace process.

The plans coincide with efforts by the national government to boost natural gas investments amid rising domestic demand for the fossil fuel and dwindling supply. 

According to figures published this month by the mines and energy ministry, the lifespan of Colombia's gas reserves stood at 8.1 years at the end of 2019, down from 9.8 years 12 months earlier.

Meanwhile, consumption has risen sharply from thermoelectric power generators, industrial consumers, households and the transport sector.

Private PPAs 

GIEP does not intend to participate in public auctions to secure supply contracts from the complex and will instead rely on the deregulated market to directly negotiate 15-year agreements with large industrial and commercial consumers.

In addition to the hydrocarbon and mining sectors, potential off-takers include the agribusiness and metals industries, which will benefit from an industrialization program for the province, in which GIEP is also investing. 

All would capitalize on the relatively low prices of natural gas compared to other energy sources, Espinosa said. 

"The great challenge is to overcome fear and believe that we are capable of having a much more dynamic economy. For this you have to take the steps that allow the transformation. We have the potential and the talent to achieve it," he added. 

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