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Will Colombia relinquish gas markets to Venezuela?

June 17, 2007

A promising gas discovery at La Creciente and possible new ones at Guama Block in northern Colombia could raise the country’s gas reserves by 25-50% from about 6Tcf now, according to Toronto-based Pacific Straus Energy (PSE).

With such an important discovery, 2008 may prove a watershed year for Colombia when it comes to gas reserves.

Despite the good news for Colombia, which needs to increase gas output in 2-3 years by 200 million cu ft/day to satisfy burgeoning demand, the big question is where such a discovery leaves Venezuela, which is vying to stake a claim in Central America’s and possibly Mexico’s gas markets.

Construction of a 225km gasline, which will extend from Campo Ballena in Colombia to Maracaibo in Venezuela, will be finished by the second half of the year. Colombia will export gas to its neighbor till 2012, when it’ll be reversed from Venezuela.

One of the interesting questions about the gas accord between Colombia and Venezuela is why would Colombia want to relinquish to its eastern neighbor transit rights to Central America and beyond? Why on earth would Colombia want to give up such a market to Venezuela if it has the gas reserves? Will Colombia want to play ball with its neighbor, considering the ideological differences between President Alvaro Uribe and his Venezuelan counterpart Hugo Chavez?

Even through Colombia and Venezuela are neighbors, their geopolitical views of Latin America and the US vary like night and day.

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