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Colombia

Incentives for production and exportation of natural gasGómez-Pinzón y Associados, Bogota

Pending approval by the Colombian Congress is a bill, "whereby a national policy is adopted concerning the exportation of natural gas and other provisions are enacted". As set out in the debates of the bill, now under review by the Chamber of Representatives, the three main matters dealt with are:

  • the deregulation of the natural gas prices;
  • export and supply for the local market; and
  • incentives for the production, transportation and consumption of natural gas.

One issue which has generated debate is the regulation of gas prices and, more specifically, the liberalization of gas prices, since it is feared that this could increase the tariffs for local consumers.

The main objectives that the congressmen submitting the bill have taken into consideration are:

  1. Breaking a vicious circle which generates a lack of competition. The problem is that natural gas prices are not liberalized because there are no competitors, and there are no competitors because the prices for producers have not been deregulated. Under the bill, a competitive gas market should break this vicious circle of production, since there is a monopoly of the Colombian state.
  2. The bill also intends to develop the local consumption of gas by making the conditions for its marketing easier, since the Colombian market is too small to absorb gas discoveries of considerable magnitude.
  3. Taking into consideration the reduced size of the local market, parallel to its development, the bill aims to increase gas exports in order to begin marketing gas findings abroad.
  4. The bill also intends to establish clearly the cases in which restrictions could be imposed on exports, as in the case of low gas reserves when there is high domestic consumption, or when, for reasons of drought, the consumption of the thermoelectric plants increases.
  5.  Another objective is to stimulate the exploration and exploitation of gas, authorizing the national government to create incentives for these activities.

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