Colombia’s energy gamble

Green hydrogen is unlikely to displace fossil fuel dependence anytime soon.

Colombia has long attempted to transition the energy sector towards greener and renewable alternatives. Among these, green hydrogen has taken centre stage. Bogotá has published a roadmap outlining how the government attempts to meet green hydrogen targets through 2030. Ambitious though the roadmap is, Colombia remains highly dependent on fossil fuels, both for domestic consumption and for export. The prospect of green hydrogen is unlikely to see the country weaning itself off of traditional energy sources anytime soon.   

A senior manager in the Colombian energy sector explained, “Ecopetrol – Colombia’s largest petroleum company – is the main producer of green hydrogen in the country and its primary consumer. The company has significant expertise in this area – it has just completed its first pilot project at the Cartagena refinery, which joins another pilot project for green hydrogen production by Promigas. The development opportunities around green hydrogen are exciting.”

“Ecopetrol – Colombia’s largest petroleum company – is the main producer of green hydrogen in the country and its primary consumer.”

A senior manager in the energy sector, Colombia

According to the government’s estimates, the green hydrogen transition is expected to generate investment of USD 5 billion and 15,000 jobs over the next ten years. Before green energy lobbies get too excited, the sector is in its nascent stages of development and scaling up challenges means less environmentally friendly energy extraction will persist in the medium-term. Indeed, this month Colombia’s National Environmental Licensing Authority approved, amid criticism from political opposition and civil society, the first fracking pilot project in Puerto Wilches, in the department of Santander. 

An adviser and expert on the Colombian energy sector explained, “I am not surprised by the fracking announcement. We have to be realistic in terms of meeting domestic demand and our energy export dynamics. Green hydrogen is more of an effort by the government to position itself on the public agenda with an environmental issue. On a positive environmental note, Colombia is already engaged in hydroelectric and thermal generation of electricity. Our renewable energy infrastructure is good by regional standards.”  

“I am not surprised by the fracking announcement. Green hydrogen is more of an effort by the government to position itself on the public agenda with an environmental issue.”

An adviser and energy expert, Colombian

On the political front, Colombia is likely to elect left-winger Gustavo Petro (“Petro”) to the presidency next month, with a potential run-off in June. A staunch critic of the country’s oil dependence and exports, he has promised to end oil and gas exploration should he be elected to office. According to Ecopetrol, this would lead to higher prices for local consumers and be challenged in court. Any green transition must be “orderly,” Ecopetrol Chief Executive Officer Felipe Bayon said.   

Indeed, a Petro victory would likely weaken Colombia’s ability to ramp up production to take advantage of high prices. This could diminish the country’s self-sufficiency in oil and gas. Renewables, which currently account for only 1% of primary energy generation, are unlikely to be able to replace fossil fuels over the next decade.  

For now, green hydrogen efforts are focused on the transport sector which could be an appetising prospect for ESG-conscious investors. The sector will see a mixture of hydrogen with natural gas in the transport infrastructure and in related distribution and logistical infrastructure. 

“The main pilots in Europe are made by mixing between 10% and 20% in transport infrastructure, which is much more robust, and in distribution infrastructure, which is what allows us to have domestic gas in the house, it is between 5% and 10% hydrogen plus methane, which is natural gas. Those are the main opportunities,” explains the energy adviser. Of course, the industry in Europe is very well established and is beginning to replace the consumption of natural gas with hydrogen. Colombia’s green hydrogen development has a long way to go to catch up. The country’s green transition is heading in the right direction, politicians will need to have a little patience.   

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