Colombia's Natural Gas Crisis Deepens as Strait of Hormuz Closure Cuts Supply
Strife-torn Colombia is facing a severe energy crisis at a critical juncture. Global supply of natural gas is heavily constrained due to the closure of the Strait of Hormuz after U.S. strikes on Iran. This could not come at a worse time for Colombia, with the Andean country experiencing a massive surge in demand for natural gas at a time when domestic production is declining. The rapidly growing supply shortfall was filled by costly liquefied natural gas (LNG) imports, the future of which now appears uncertain. These events are weighing heavily on Colombia's vulnerable economy.
Colombia's energy patch appears caught in a death spiral with petroleum and natural gas production declining sharply over the last decade. During March 2026, petroleum output grew by just under 1% compared to a month prior but was 1% lower year over year to an average of 740,497 barrels per day. This is significantly lower than the 917,210 barrels per day lifted a decade earlier for March 2016.
Declining oil production is a key contributor to Colombia's emerging energy crisis because a considerable portion of the natural gas produced in the Andean country is associated with petroleum production. Drillers are using that associated natural gas for enhanced recovery by reinjecting it into petroleum reservoirs to boost pressure and reduce viscosity, especially for Colombia's mature heavy oil fields.
Indeed, the aging nature of Colombia's oilfields, with most having reached peak production a decade or more ago, places greater pressure on drillers to employ enhanced recovery. This means more associated natural gas is being deployed for oil recovery purposes, removing it from domestic commercial supply, thereby exacerbating the supply shortfall.
Colombia's March 2026 natural gas production rose by 0.7% month over month to 700 million cubic feet, but this still represented an almost 15% decline compared to the same period a year earlier. That illustrates that the Andean country's natural gas output is caught in a death spiral, especially when it is considered that it is a whopping 38% lower than a decade earlier.
In comparison, at the start of 2016, Colombia was self-sufficient when it came to natural gas supply, although costly LNG imports did begin in December of that year as a supply shortfall started developing. Along with ever-worsening domestic supply constraints, growing demand for natural gas in Colombia, where it is a crucial industrial and household fuel, is creating a massive shortfall.
Declining natural gas output is not the only significant issue. A marked drop in Colombia's reserves of the fossil fuel is also weighing heavily on the hydrocarbon industry's future and a deteriorating economy. By the end of 2024, the Andean country had only proved reserves of two trillion cubic feet, which is sufficient for another 5.9 years of production.
That number was not only 3.3% lower than a year earlier, but it is also the lowest proved natural gas reserves in well over two decades. A lack of exploration drilling is weighing heavily on Colombia's ability to boost its hydrocarbon reserves, especially for natural gas. This is placing considerable pressure on the country's fragile economy, where gross domestic product only expanded by 2.2% for the first quarter of 2026.
Consequently, there are fears of an energy crisis emerging because of the sharp decline in hydrocarbon production, which is occurring primarily because of President Gustavo Petro's policies aimed at reducing fossil fuel dependence. These, which include significant tax hikes as well as a ban on awarding new exploration and production contracts, are responsible for causing natural gas output to plummet precipitously to unsustainable historical lows.
A major driver of rising natural gas consumption is the shift from coal-fired to natural gas-fired power plants. While around 65% of Colombia's electricity is generated by hydro plants, an increasing proportion is produced by thermal plants, many of which are reliant on coal as a fuel. El Niño-driven drought continues to reduce water flows and hydropower output, forcing Colombia to generate more electricity from thermal plants, placing considerable pressure on the already constrained natural gas supply.
You see, Bogota is steadily phasing out coal-fired facilities, thereby boosting consumption of natural gas, particularly during times of El Niño-induced drought. Without sufficient fuel to fire Colombia's thermal plants at times of high electricity demand, an already stretched grid risks collapsing, especially with brownouts and even blackouts regular occurrences in numerous cities as well as remote areas.
Natural gas is a cost-effective fuel widely used by industry in Colombia, where the manufacturing sector contributes 10% of gross domestic product (GDP). It is also the only widely available low-cost household fuel used in a country where nearly 32% of the population lives in poverty. For those reasons, the expected substantial increase in expensive natural gas imports will sharply impact the economy while causing the cost of living to spiral higher.
As discussed, Colombia is no longer self-sufficient when it comes to natural gas. A rapidly expanding domestic supply shortfall is forcing the country to become more dependent on LNG imports, which are more expensive than domestically produced natural gas. This is because there are liquefaction costs at the point of manufacture, shipping expenses, and regasification costs at the port of delivery with the average price of imported natural gas climbing 26% from $14.64 to $18.39 per MBTU.
Indeed, industry data shows the cost of natural gas for industrial consumers during 2025 soared by 69%, yet for households, which receive mostly domestic production, surged by 23% that year. This is not only impacting vital economic sectors and the cost of living but is also one of the major causes driving higher inflation, which for April 2026 hit 5.68% up from 5.16% a year earlier.
There are fears that as the proportion of domestic natural gas supply provided by LNG imports grows, prices will rise even higher, further impacting industry and households. By the end of 2025, 18% of Colombia's natural gas supply was sourced from imports, and this was originally expected to grow to 26% during 2026, but there are signs it may expand to as much as 33% because of dwindling domestic production.
Iran disrupted roughly a fifth of Qatar's LNG production, immediately causing global LNG supply to tighten, sending prices higher. That pressure is being intensified by the closure of the Strait of Hormuz, through which about 20% of global natural gas shipments pass each year. This is causing LNG prices to spiral higher, which will have a sharp impact on Colombia's natural gas supply, further damaging an already weak economy laboring under considerable debt and large fiscal deficits.
By Matthew Smith for Oilprice.com
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