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About Commodity Insights
Natural Gas
February 03, 2025
The discoveries made by the Sirius-1 and Sirius-2 wells in the Lower Guajira Basin mark a pivotal moment for Colombia's energy sector.
The Sirius project is a joint venture between Ecopetrol and Petrobras Colombia and Brazil's national oil companies, respectively. As announced on Dec. 5, 2024, by the operator, Petrobras, the Sirius 1 gas field is poised to significantly increase Colombia's gas reserves, with the broader block potentially holding more than 6 Tcf of gas. Previously known as Uchuva, the field is part of the GUA-OFF-0 block, formerly referred to as Tayrona.
While future projects will not address the domestic natural gas shortages predicted by the Colombian Association of Natural Gas, the new discovery can potentially triple Colombia's gas reserves and transform the future of domestic gas supply in the region. Experts believe that the development of this field could play an important role in enhancing Colombia's energy security, with reliance on imports potentially reduced and anticipated gas shortages addressed. This project may be seen as a significant opportunity for Colombia's domestic energy supply and could be regarded as a strategic asset within the broader framework of the country's energy security.
The commercial viability of the Sirius project is still under evaluation, with plans to conduct additional tests at the Sirius-2 well. However, Petrobras and Ecopetrol have already outlined the initial development strategy for the future project. This strategy includes starting offshore gas production between 2029 and 2030, with four producing wells and an expected production plateau of 13 MMcm/d (460 MMcf/d) of gas over a decade.
The proposed development strategy for the project involves implementing a subsea system, which is an underwater infrastructure used to produce and transport hydrocarbons offshore, and a pipeline to shore, connecting to the existing Ballena complex. This approach offers several advantages, particularly in terms of reduced capital expenditure by using the existing gas processing plant and available spare capacity.
Additionally, it facilitates a straightforward connection to the domestic gas market by integrating with the National Transportation System through the pre-existing infrastructure in the region.
Vantage, from S&P Global Commodity Insights, has modeled the potential Sirius development using the cost estimation platform QUESTOR from Commodity Insights. The model outlines the initial drilling of four gas production wells, followed by two additional wells to sustain the plateau. Operations are set to begin in 2029, reaching plateau in 2032 and ending production by 2062. A 90-km flowline was modeled to be connected to the Ballena complex where it would be processed and further connected to the National Transportation System.
The economic analysis, using Vantage commodity price scenarios, demonstrates the project's financial viability. The break-even price reaches over $2.5/Mcf at the exit of the Ballena complex. Revenue projections vary significantly based on different commodity price scenarios.
A sensitivity analysis reveals that the project becomes uneconomic at a Henry Hub base price of $2.30/Mcf. These findings underscore the project's strong sensitivity to commodity price fluctuations.
The Sirius gas asset, when valued at our base natural gas price, yields an After-Tax Net Present Value of approximately $1.7 billion, discounted at a 10% rate. While the analysis focuses on a domestic market strategy, there's potential for increased asset valuation if a portion of the production is considered for LNG feedstock, especially if more discoveries are made in the area.
The initial investment in the Sirius project is substantial. Petrobras estimates the exploratory expenditure at around $1.2 billion, with a production development cost estimated at $2.9 billion, totaling approximately $4.1 billion for the whole project.
Even if the offshore development materializes, the project faces significant challenges around onshore and offshore infrastructure, as well as legal and social issues. A long pipeline infrastructure must be built to guarantee the domestic market gas flow. Additionally, obtaining permits and environmental licenses poses a major challenge.
Recently, a court order has temporarily halted drilling activities due to a lawsuit filed by a local indigenous community. Extensive consultations with local communities are required to move forward.
Despite the challenges outlined, the successful development of the Sirius gas field offers potential benefits for Colombia's energy security and overall strategy. It offers a long-term solution to domestic gas supply shortages and aligns with the country's broader transition to a sustainable energy future.
A comprehensive assessment of all influencing factors, including rigorous gas sales contract term evaluation, will be essential to the final decision. As Colombia charts its energy course, the Sirius project presents an opportunity that must be carefully balanced with economic, environmental, and social considerations.