Colombia Braces for Surging Energy Costs as Natural Gas Deficit Expands

Fitch Ratings says Colombia may face rising energy costs in the coming years due to increased reliance on imported natural gas. This shift has been necessary to meet growing demand amid declining domestic gas production. The country’s regulatory framework allows energy companies to pass on higher costs to consumers, but political pressure may mount as higher costs burden the broader economy.

Although hydroelectric power leads Colombia’s electricity generation, the country relies on gas-fired electricity for baseload supply, especially during droughts and high-demand periods. Colombia has historically been largely self-sufficient in natural gas, but imports rose to almost 20% of consumption in 2024 because of lower-than-usual hydroelectricity generation, domestic gas production issues, and geographical imbalances.

Industry associations project that the structural deficit in natural gas will widen, with domestic gas production capacity only meeting 88% of projected consumption in 2025 and 70% in 2026. Colombia’s main gas transporters, Transportadora de Gas Internacional S.A. ESP (TGI; BBB/Negative) and Promigas S.A. E.S.P. (BBB-/stable), are investing heavily in natural gas transportation infrastructure to support increasing gas imports and new onshore gas projects and to improve connectivity within the country.

Courtesy: Fitch Ratings.

Retail gas prices have risen sharply in some regions. In February 2025, Vanti (AAA(col)/stable) announced a 36% price hike in Bogotá, while Empresas Públicas de Medellín (EPM; BB+/negative) hiked prices by 21% in Medellín. Other gas distributors, such as Gases del Caribe (Gascaribe; AAA(col)/stable), Surtidora de Gas del Caribe (Surtigas; AAA(col)/Stable) and Gases de Occidente (GDO; AAA(col)/stable), which supply gas to Cartagena, Barranquilla and Cali, respectively, have maintained domestic supply and moderated price adjustments by leveraging access to smaller fields in northern and southwestern Colombia.

Colombia’s proven gas reserves are declining, with projections indicating only six years of supply remaining by 2025 at the current production rate of 965 giga British thermal units (GBtu) per day. Upstream gas production is dominated by two major producers, Ecopetrol S.A. (BB+/Negative) with around 58% market share, and Canacol Energy Ltd. (NR) with 17%. However, their production rates have fallen in recent years. Total production at the key Cusiana, Cupiagua, and La Guajira fields has dropped to 425 GBTU per day from 550 GBTU per day over the past year.

The decline in domestic gas production, which partly reflects geological constraints, has been accelerated by government policies that deter investments in the oil and gas industry. In 2023, Colombia became the first Latin American country to sign the Fossil Fuel Non-Proliferation Treaty at COP28, and the government announced it would stop issuing new oil drilling and exploration contracts.

Gas distributors in Colombia benefit from a regulated tariffs regime that allows supply costs to be transferred to end users. However, rising energy costs could increase working capital needs and heighten political pressures for energy companies along the value chain.

Even with regulatory measures in place to protect margins, Colombia’s electricity distribution companies’ finances are being strained by rising energy prices experienced in the past year and political intervention. The sector has faced financial challenges due to restrictions on tariff increases imposed by the local regulator since the pandemic and the government’s fiscal challenges, which have resulted in delayed subsidy payments. EPM will likely have to financially support its subsidiary Afinia (AAA(col)/stable), which has been particularly affected by payment delays.

Photo credit: Ken Doerr.