OREANDA-NEWS. Colombia's industrial sector is wary of the costs of imported LNG in the face of domestic natural gas shortages as early as 2017.

LNG is a "safeguard" but it is "not viable," Colombia's business chamber ANDI told Argus this week. "It's impossible for industry to compete with gas at $10 or more per million Btu."

LNG is supposed to start arriving in Colombia at the end of 2016 through a new terminal near Cartagena on the Caribbean coast. A local consortium led by Colombian gas distributor Promigas is building the 400mn ft3/d regasification terminal on behalf of Grupo Termico, a group of thermal power generators.

Grupo Termico has already solicited non-binding offers for LNG supply, but has yet to reach a firm deal, market participants say.

Colombian authorities have also talked of building a Pacific coast terminal.

The Argus US Gulf Coast fob price for 2017 loading was $6.67/mn Btu on 18 August. The shipping cost between Sabine Pass and Cartagena is about $0.20/mn Btu, based on current fuel oil and freight prices. This implies LNG could be delivered from the US to Colombia for under $7/mn Btu in 2017.

The Argus Atlantic Basin index is currently around $7.40/mn Btu, after hitting a year-to-date trough of $6.3/mn Btu in mid-April.

Colombia produced 966mn ft3/d (27.35mn m3/d) in July, down by 6.6pc from 1.035bn ft3/d in June and below the 2015 year-to-date average of 1.034bn ft3/d.

Colombia's gas reserves totaled 5.9 trillion ft3 at the end of 2014, putting its gas reserves-to-production ratio at 13.2 years.

Colombia?s oil and gas chamber (ACP) has warned of a gas deficit on the Caribbean coast of the country in 2017, and a 190mn ft3/d nationwide deficit the following year unless significant new reserves are uncovered.

Scarcity of gas in the Caribbean market has pushed Colombia's Guajira province prices beyond the $5.70-4.60/mn Btu range ACP had projected early this year.

Bolsa Mercantil de Colombia's (BMC) new gas exchange reported that Ballena, one of three fields making up the Chevron-operated Guajira contract, averaged $7.51/mn Btu in July, flat with June, and up 19pc from $6.30/mn Btu in February, when the gas exchange started handling directly negotiated supply contracts.

Guajira prices hovered at $4.10-5.00/mn Btu in 2014.

BMC reported that the average price from 23 fields across the country whose gas supply contracts are registered on the exchange's primary market was $4.52/mn Btu in the first half of the year.

The Andean interior market is logistically disconnected from the Caribbean market, resulting in a significant price differential between the two regional markets.

"Gas is a regional market and in the [Atlantic coast gas market] there's a little more scarcity than what happens in the interior," ANDI says.

Cusiana and Cupiagua firm contract gas prices, two main references for the Andean interior market, averaged $3.11/mn Btu in the first half of the year.

Ballena, Chuchupa and Riohacha in Guajira peaked in 2010 at a total of 684mn ft3/d, according to the ACP.

Recent figures from the National Hydrocarbons Agency (ANH) show that Ballenas and Chuchupa were producing a total of around 450mn ft3/d in June. Riohacha shows no production since April, compared with a 2014 average of 19.1mn ft3/d. Chevron declined to comment.