Colombia Coal Mine
Methane Market Study
EPA Publication No:
March 2019
United States
Environmental Protection
Coalbed Methane
otnnncH mooiuju
Methane Initiative

Colombia Coal Mine Methane Market Study
Table of Contents
1.0 Executive Summary	
1.1	Introduction	
1.2	Colombia's Energy Usage
1.2.1	Coal	
1.2.2	Electricity	
1.2.3 Natural Gas	2
1.3 Coal Mine and Coalbed Methane (CMM and CBM) Resources and Methane Emissions	4
2.0 Coal Market	7
2.1	Overview	7
2.2	Coal Production	7
2.2.1	Geographic Distribution	7
2.2.2	Coal Type and Quality	9
2.2.3	Coal Company Ownership	9
2.2.4	Coal Production Trends	10
2.3	Supply and Demand	12
2.4	Imports and Exports	12
2.5	Coal Market Regulations	14
2.5.1	Regulatory Agencies	14
2.5.2	Existing Regulations	15
3.0 Electricity Market	17
3.1	Overview	17
3.2	Organization of the Electricity Sector	18
3.3	Generation	19
3.3.1	Generation Mix	19
3.3.2	Generation Demand and Projections	20
4.3.3	Electricity Market Pricing	22
3.4	Grid Integration	23
3.5	Renewable Energy Potential	25
4.0 Natural Gas Market	26
4.1 Overview	26
4.2. Recent Trends in Colombia's Natural Gas Market	26
4.3 Natural Gas Supply	27
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4.3.1	Conventional Domestic Natural Gas Production	27
4.3.2	Midstream Infrastructure	30
4.3.3	Liquefied Natural Gas (LNG)	32
4.3.4	Unconventional Shale Gas	32
4.4	Structure of Colombia's Natural Gas Industry	33
4.5	Natural Gas Market Policy and Pricing	34
4.5.1	Policy and Reforms	34
4.5.2	Foreign Direct Investment (FDI)	34
4.5.3	Natural Gas Market Pricing	36
5.0 Coal Mine Methane (CMM) Market	37
5.1	Overview	37
5.2	Current CMM and CBM Projects and Coal Mine Methane Emissions	38
5.3	Regulatory and Legislative Environment	40
5.4	Challenges to CMM Projects	41
5.5	Benefits of Implementing CMM and CBM Projects in Colombia	42
6.0 References	42
7.0 Appendix A	47
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1.0	Executive Summary
1.1	Introduction
This document serves to provide an overview of Colombia's energy markets, and
specifically to identify opportunities for coal mine methane (CMM) utilization and
emissions reduction projects in Colombia. This report is funded by the United States
Environmental Protection Agency (USEPA) in support of the Global Methane Initiative
(GMI). More information on the GMI can be found at: This
report summarizes the markets for coal, electricity, natural gas, and coal mine methane,
based on publicly available data.
1.2	Colombia's Energy Usage
1.2.1	Coal
In 2017, Colombia was the world's twelfth largest producer of coal, with the largest
proved coal reserves in South America (BP, 2017). Three companies account for 82
percent of Colombia's total coal production (ANM, 2018). The northern departments of
Guajira and Cesar are home to Colombia's largest coal deposits, but in addition to Guajira
and Cesar, there are a number of smaller coal-producing areas scattered throughout
Colombia's central interior. Of Colombia's 13 largest coal mines, 11 are open-pit mines
(GMI, 2015).
Due to Colombia's enormous hydroelectric generation capacity, Colombia's coal
production consistently exceeds its consumption. In 2015, Colombia consumed only 10
Mt of the 85 Mt of coal it produced (BP, 2016.1). The remaining 75 Mt was exported,
making Colombia the fifth-largest coal exporter in the world (EIA, 2016).
The Ministry of Mines and Energy (MinMinas), Colombia's original national mining
authority, was expanded in 2010 to work with the newly-formed National Mining Agency
(ANM) (Latin Lawyer, 2016; Norton Rose Fulbright, 2011).
1.2.2	Electricity
Despite being rich in hydrocarbon resources, Colombia supplies close to 70
percent of its total power requirements via hydroelectric facilities (ProColombia, 2015). Of
the remaining 30 percent, Colombia generates 10 percent and 7 percent of its electricity
demand from natural gas and thermal coal, respectively (ProColombia, 2015). The
majority of Colombia's power generation, from both hydroelectric and thermal facilities
comes from the nation's northern and central departments. Five companies fulfill 86
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percent of Colombia's electricity demand (XM, 2015). Emgesa's Guavio facility is
Colombia's largest hydroelectric plant, with of 1,250 MW of effective capacity (XN, 2018).
Colombia's largest thermal coal plant, a GECELCA facility, boasts 273 MW of generation
capacity (XN, 2018).
The majority of Colombia's population resides in less than half of the country's land
area. The populous regions of Colombia are mostly within northern and central
departments, and are serviced by the National Interconnected System (NIS). The
remaining portions of Colombia are classified as Non-Interconnected Zones (ZNI). Areas
in the NIS have access to electricity, while ZNI areas use diesel fuel as their primary
power source. ZNI areas, however, are expected to shrink in the coming years, as the
Colombian government has established an investment fund aimed at modernizing and
improving ZNI energy infrastructure. To keep pace with surging national energy demand,
the Colombian government plans to expand and improve its current electricity grid
In 2017, Colombia's total demand for energy grew by 1.3 percent. A subsidiary of
MinMinas, the Mining and Energy Planning Unit (UPME) expects upward this trend to
continue, with Colombian energy demand projections growing by an annual average of
3.4 percent through 2027 (MaRS, 2015). Colombian economic growth and urban
expansion will continue to support the nation's energy demand growth well into the first
quarter of the 21st century. This increase in demand should help lower residential
electricity prices that are some of Latin America's highest. One explanation for Colombia's
high residential electricity prices is that they are inflated by electricity tariffs (MaRS, 2015).
The nation's high prices, however, are mitigated by an income bracket system that
subsidizes electricity costs; a similar subsidy system is also used in Colombia's natural
gas sector.
Colombia's climate and geography provide enormous potential for renewable
energy projects, excluding hydropower, but Colombia only generates 3 percent of its total
energy mix via renewable technologies (MaRS, 2015). A question for Colombia's future,
therefore, becomes whether new investments will flow into renewable projects or continue
to flow into existing technologies.
1.2.3 Natural Gas
Colombia boasts the sixth-largest proved natural gas reserves in South America
(BP, 2016). The majority of these natural gas reserves are located in two basins, Guajira
and Llanos. The Guajira Basin, located in northern onshore and just offshore Colombia,
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holds 1.02 Tcf of proved reserves, and has historically accounted for the bulk of
Colombia's natural gas production (ARI COGSM). The Llanos Basin, which holds 3.9 Tcf
of proved reserves, produced 199 Bcf in 2014 (ARI COGSM). Guajira Basin production,
however, began to decline in 2017, while Llanos Basin production is expected to increase
and offset these declines.
Midstream infrastructure is a much greater problem for Colombia than upstream
infrastructure. Colombia's dense jungles and mountainous topography make
transportation difficult. Nonetheless, Colombia boasts 4,991km of natural gas pipelines,
with several companies committing to invest in future projects (CIA, 2013). Improvements
to Colombia's natural gas infrastructure are crucial to meeting growing demand for the
In addition to conventional natural gas production, Colombia potentially holds
world-class shale source rocks. ExxonMobil, ConocoPhillips, and Royal Dutch Shell all
own lease blocks in Colombia's Middle Magdalena Valley (MMV). However, the
Colombian government has only recently established a regulatory framework for
exploration of unconventional gas, so no wells have been drilled to date. ConocoPhillips
was the first company to receive an environmental license to drill at well in 2019. This first
well will be used by the Colombian Government to test the regulatory framework
(including the environmental framework) and fine-tune the regulations, before it issues
more licenses to explore for unconventional gas.
Currently, almost half of Colombia's natural gas production is reinjected into
maturing oil fields for enhanced oil recovery (EOR) (EIA, 2016). Colombia's second-
largest natural gas usage is pipeline gas. Colombia also uses natural gas to generate
electricity, as an industrial fuel, and as automotive fuel. Colombia's fleet of natural gas-
powered vehicles is already the 7th largest in the world, with this figure expected to grow
(AAPG, 2016). As Colombia's economy continues to expand, natural gas production must
be sufficient to satisfy the nation's EOR, industrial, and residential needs. Colombian
natural gas demand, therefore, should continue to increase, as the nation's demand for
gas has surged by 60 percent in the last decade (EIA, 2016).
The Colombian government has supported the fossil fuel industry since the
inception of the National Hydrocarbons Agency (ANH) in 2003. In 2011, the Colombian
government published a decree outlining plans to increase natural gas production,
specifically unconventional natural gas from gas shale formations and coal mines (EIA,
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1.3 Coal Mine and Coalbed Methane (CMM and CBM) Resources and Methane
Colombia's 6,746 Mt of proved coal reserves are thought to hold significant
volumes of coal mine and coalbed methane (CBM and CMM) utilization potential. The
ANH estimates its CMM/CBM reserves to be between 11 and 35 Tcf, compared to its 4.8
Tcf of proved natural gas reserves (ANH, 2011; BP, 2016).
With the majority of Colombia's coal production coming from the northern
departments of Guajira and Cesar, most of the nation's CMM/CBM efforts have also been
focused in this region. Despite the nation's large proved coal reserves, only a limited
amount of work has been conducted to assess the potential for CMM/CBM development.
In 2015, the U.S. Trade and Development Agency (USTDA) awarded Generadora y
Commercializadora de Energfa del Caribe S.A. (GECELCA) a grant to fund a CMM/CBM
feasibility project in the Cordoba area (USTDA, 2015). Additionally, in 2017, a pre-
feasibility study was conducted to evaluate the economic opportunities from implementing
a CMM/CBM project at the San Juaquin mine in the Antioquia Department (EPA, 2017).
Outside of these published studies, Drummond has drilled a number of test wells, but has
not published the data.
Colombian laws empower the National Hydrocarbons Agency (ANH), an
administrative body under the Ministry of Mines and Energy (MinMinas), to award areas
for exploration and production of hydrocarbons, including CBM. The National Mining
Agency (ANM), another administrative body under MinMinas, is charged with managing
Colombia's mineral resources. In 2010, Colombia published its National Development
Plan (NDP) 2010-2014. In it, the government identified the mining sector as a critical
industry for economic growth, specifically mentioning CMM/CBM projects as an
expansion area (MinMinas, 2010). As a result of NDP 2010-2014, the Colombian
government published a 2011 decree describing its plan to increase natural gas
production, particularly from gassy coal mines (EIA, 2016). Furthermore, that same
decree set forth a 40 percent reduction in government royalties applicable to
unconventional hydrocarbons, which includes CBM (GMI, 2017). However, despite these
various decrees and plans, there have been no CMM projects implemented and only test
wells drilled for CBM.
CMM utilization in Colombia could offer a number of benefits, including on-site
power generation, improved mine safety conditions, and additional revenue capture. The
majority of CMM projects around the world currently use the produced gas to generate
power at the mine site. Many of these projects supply electricity to mine operations in
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order to lower operating costs by reducing power purchases from the grid. There are a
number of advantages to developing on-site CMM power projects, including relatively low
capital costs to purchase the gas generators, the ability to utilize CMM down to
concentrations of 30 percent methane (CH4), the flexibility to build the project in modules,
and the option to move the power plant to other parts of the mine or other mine sites if
the gas supply declines to the point that it cannot support power plant operations. A review
of Colombia's electricity sector reveals a number of factors that suggest there is a
potentially strong market for CMM power projects. These factors are:
1)	High electricity prices: Colombia has some of the highest electricity tariffs for
residential and industrial customers in South America, owing to its unreliable
distribution infrastructure. The ability for mines to generate power on-site using
CMM will provide both a lower cost and more stable electricity supply for the
2)	Reliability of hydroelectricity: Hydropower currently accounts for about 70
percent of the country's electrical generation capacity. However, hydropower
can be adversely affected by El Nino/La Nina-related events, as have been
experienced during the last several years. CMM power projects would help
provide a more secure source of electricity for the mines.
3)	Increasing natural demand coupled with declining gas production: Over
the past decade, demand for natural gas in Colombia has increased 60%, turning
Colombia from a net exporter of natural gas into a net importer. Exacerbating the
supply/demand imbalance is the fact that gas production in the country has fallen
about 10 percent over the past 5 years. Therefore, it is likely that any CMM
produced would be readily absorbed by the market, provided there are adequate
means of transporting the gas to customers.
4)	Increased coal production: Coal is expected to continue driving Colombian
economic growth, with coal production estimated to grow 20% by 2020 (World
Coal, 2016). In concert with the increase in coal production, there will also be an
increase in Colombia's CMM emissions, as existing mines get deeper and new
ones are opened. These increased CMM emissions should present good
opportunities for CMM utilization projects.
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5) Colombia's signing of the Paris Agreement1: Colombia is a signatory to the
Paris Agreement and has committed to reducing its greenhouse gas (GHG)
emissions by 20 percent by 2030. The implementation of CMM projects would
be helpful in the nation's ability to meet this goal, especially if coal production
increases as forecast.
While there are a number of factors promoting and supporting the development of
CMM projects in Colombia, there are also a number of challenges facing their
implementation, including:
1)	Thirteen of Colombia's fifteen largest coal mines are surface mines: As a
result, CMM/CBM utilization potential at these mines is limited to pre-mine
2)	Inadequate characterization of CMM reservoir properties: Limited work in
the country has been performed to assess key reservoir properties governing the
flow of methane through coal seams (e.g., gas content, permeability, gas
saturation, etc.), making it difficult to accurately determine reserves and project
3)	Limited technical and financial resources: The majority of the underground
mines in Colombia are small and operated by companies with limited technical
and financial capacity to implement a CMM project.
4)	Limited access to service providers: Most CMM projects require some type of
drilling, either wells drilled from the surface for pre-drainage wells and/or gob
wells or in-mine horizontal/cross-measure boreholes. While companies
operating in Colombia do have some drilling rigs that could drill surface-based
wells, there are currently no drilling companies that can provide in-mine drilling
From 2000 to 2015, Colombian CMM methane emissions rose from 231 Mm3 to
651 Mm3 (GMI, 2015). If Colombia is able to economically implement CMM utilization
projects, the impact on emissions could be substantial. The 2017 prefeasibility study at
the San Juaquin mine in Antioquia estimates the project could result in a net emissions
reduction of 610,000 Mt CCtee (EPA, 2017). The Cordoba feasibility study estimates the
potential for 35 MMt CCtee emissions reductions if the project were to be implemented
1 More information on the Paris Agreement can be found at:
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(GECELCA, 2017). These projects would contribute to lowering Colombia's greenhouse
gas emissions leading up to their 2030 commitment. Furthermore, coal mine
degasification related to CMM utilization would increase safety conditions for Colombian
coal miners. Finally, Colombian natural gas demand is expected to increase from 450
Bcf/year in 2015, to 500 Bcf/year in 2020 (ARI COGSM). CMM/CBM utilization could help
meet this increased gas demand.
2.0	Coal Market
2.1	Overview
In 2015, Colombia's 6,746 Mt of proved coal reserves were the largest in South
America (BP, 2016.1). In that same year, Colombia produced 85 Mt of coal, making it the
region's largest producer (BP, 2016.1). The majority of Colombia's coal production comes
from the northern departments of Guajira and Cesar. These two departments account for
over 90 percent of Colombia's total coal production (GMI, 2015; Cerejon, 2013; Mining
Atlas, 2016). Guajira is home to El Cerrejon, Colombia's most prolific coal mine. The
Cerrejon Zona Norte mine is the largest open-pit coal mine in the world, which produced
33 Mt in 2014 (Bloomberg, 2015). Colombia's largest coal producers are Cerrejon Coal
Company, Drummond International, and a partnership between Glencore and Prodeco.
2.2	Coal Production
2.2.1 Geographic Distribution
Colombia's coal production largely comes from the northern departments of
Guajira and Cesar (Figure 1) (GMI, 2015). There are also, however, widespread small
and medium-sized coal producing areas in Norte de Santander, Santander, Antioquia,
Cundinamarca, Boyaca, Valle de Cauca, Cauca, Borde Llanero, and Llanura Amazonica
(GMI, 2015). Most of Colombia's coal export infrastructure is located on the Caribbean
coast (EIA, 2016).
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Coal Fields
| Department (Adminstrative boundary)
360 Miles
0	112.5 225
	1	I	I	I	I	I	L
450 Kilometers
j	I
Figure 1: Figure showing the locations of Colombian coal basins, sub-basins, and department
boundaries (Figure adapted from USGS, 2006).
El Cerrejon encompasses roughly 69,000 hectares and is located in La Guajira. El
Cerrejon is divided into northern, central, and southern zones. The northern zone is the
largest of the three and is home to the Cerrejon Zona Norte mine, the largest open-pit
coal mine in the world (USGS, 2006). in 2017, El Cerrejon produced 32.1 Mt of coal and
holds 4,874 Mt of reserves (ANM, 2018). El Cerrejon accounted for 43 percent of
Colombia's 2013 export revenue, as well as 3.8 percent of 2013 global coal production.
La Cesar is Colombia's second major coal-producing department. Within La Cesar
are two major mines: La Loma and La Jagua. In 2017, La Loma produced 13.61 Mt of
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coal and held 484 Mt of reserves (ANM, 2018). In 2017, La Jagua produced 4.7 Mt of
coal and held 260 Mt of reserves (ANM, 2018).
More information on these mines is provided in the Appendix A.
2.2.2 Coal Type and Quality
Colombia's proved coal reserves consist mainly of high-quality bituminous coal
and a small amount of metallurgical coal (Table 1) (GMI, 2015). Furthermore, Colombia's
high-quality bituminous coal reserves are the largest in Latin America (GMI, 2015). Coal
from the El Cerrejon and La Loma mines have sulfur contents less than 1 percent and
ash contents between 7.5-7.7 percent (Jahnig, 2007). Due to its relatively clean-burning
nature, Colombia's coal is in high-demand and used almost entirely for export.
in Place
A Bitum
B Bitum
C Bitum








Valle del Santander


Norte de Santander






Total Recovery

Table 1: Colombia's Mineable Reserves and Quality by Region (adapted from ANH, 2011).
2.2.3 Coal Company Ownership
Three companies account for 82 percent of Colombia's coal production (Table 2)
(World Coal, 2017). Cerrejon Coal Company, a consortium composed of Anglo-American,
BHP Billiton, and Xstrata, is Colombia's largest coal producer and operates the El
Cerrejon mines, railroad, and associated Caribbean coast export terminal (GMI, 2015;
EIA, 2016). Drummond International, a partnership between U.S.-based Drummond
Company and Japan's Itochu Corporation, is Colombia's second largest coal producer.
Drummond International controls the La Loma mine and its mine-railway-port
infrastructure. Colombia's third largest coal producer, a partnership between Glencore
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and Prodeco, maintains the La Jagua mine. The remaining coal production is divided
amongst smaller private companies.
2.2.4 Coal Production Trends
Coal is expected to continue driving growth in Colombia's mining industry. Annual
coal production from 2010-2015 surged by 15 percent from 75 Mt to 85 Mt, and by 2020,
production is projected to reach 105 Mt (Figure 2) (BP, 2016; World Coal, 2016). While
coal production will remain largely dominated by Cerrejon Coal Company, Drummond
International, and Prodeco, Murray Energy Corporation's newly acquired La Francia, El
Hatillo, and undeveloped mines will also contribute to production growth (World Coal,
In addition, Colombian coal is highly competitive with U.S. coal with power
generators along the Gulf of Mexico and southern Atlantic coast, and will remain in high
demand (EIA, 2016.1). Coal prices have rebounded slightly from their lows in early 2016,
and with each incremental price increase, greater production comes online. Colombia's
coal production will likely continue to grow in the near future, as low operating costs and
resilient demand supports profitability.
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Table 2: Table showing Colombia's coal mines and their respective owners, production and
reserves (ANM, 2018; GMI, 2015; Cerrejon, 2013; Mining Atlas, 2016).
Mine Owner
(Mt per
Cerrejon Zona
La Guajira
Cerrejon Coal
Cerrejon Zona
Norte Patilla
La Guajira
Cerrejon Coal
La Guajira
Cerrejon Coal
La Guajira
Cerrejon Coal
La Loma
El Descanso
El Hatillo
Murray Energy
La Jagua
La Francia
Murray Energy
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Colombia's Historical and Projected
Coal Produciton Growth
.2 40
Figure 2: Graph showing Colombia's historical and projected coal production. Colombia produced
86 Mt of coal in 2015, and is projected to produce 105 Mt in 2020 (BP, 2016; World Coal, 2016).
2.3	Supply and Demand
As shown in Figure 3, Colombia consistently has an excess coal supply; in 2014,
only 8 Mt of 88 Mt of coal were consumed in the country (EIA, 2016). Colombia may
experience an uptick in demand for coal in the near future, as El Nino conditions decrease
hydropower infrastructures' reliability, but natural gas is the more likely substitute.
Demand for Colombian coal internationally, however, is very strong, due to its high quality
and low sulfur content. Therefore, Colombia's coal supply will continue to exceed
domestic demand in order to satisfy international demand for the high-quality, cost-
effective Colombian coal.
2.4	Imports and Exports
Colombia's net exports in 2015 totaled 80 Mt, making it the fifth-largest coal
exporter in the world behind Indonesia, Australia, Russia, and the United States (EIA,
2016). There remain, however, significant opportunities for Colombia to increase its coal
exports. Europe has historically been the largest destination for Colombian coal, but U.S.
imports of Colombian coal grew by 8 percent between 2014 and 2015 (Figure 4) (EIA,
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Historical Colombian Coal
Production and Consumption
2000 2002 2004 2006 2008	2010	2012	2014
^^"Production Consumption
Figure 3: Figure showing Historical Colombian Coal Production and Consumption. The difference
between production and consumption is assumed to represent Colombia's net exports (EIA, 2016).
Colombian Coal Exports
¦ Europe
Latin America and
the Caribbean
United States
¦ Other
Figure 4: Figure showing Colombia's coal export destinations. Europe is currently Colombia's
largest coal export destination (EIA, 2016).
Furthermore, in 2015, Colombia's coal exports to Turkey and the Netherlands
increased by 24 percent and 11 percent, respectively (World Coal, 2016). Colombia has
also begun increasing export shipments to the Pacific. In early 2016, South Korea's East-
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West Power utility (EWP) ordered close to 670,000 tonnes of Colombian coal (Reuters,
2016). The expansion of the Panama Canal, nearing completion, will further boost
Colombian coal access to Asia (Reuters, 2016). Large reserves, competitive operation
costs, and low transportation costs signify that, despite a weakened price environment,
demand for Colombian coal may remain steady.
2.5 Coal Market Regulations
2.5.1 Regulatory Agencies
Because of the mining industry's economic significance, Colombia's policies and
regulations tend to be favorable towards the mining industry. Private companies own and
operate all of Colombia's individual coal mines. The Ministry of Mines and Energy
(MinMinas) is Colombia's original national mining authority with the capacity to regulate
mining activities in accordance with Congressional laws (Latin Lawyer, 2016). In 2010,
the National Mining Agency (ANM) was created to work in coordination with the Ministry
of Mines and Energy to better administer Colombia's mineral resources, grant new mining
titles, and help the private sector with public relations (Latin Lawyer, 2016; Norton Rose
Fulbright, 2011). Figure 5 illustrates the relationship between Colombia's relevant
regulatory bodies.
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This Ministry is an upper level executive office, whose responsibility is to manage the
country's non-renewable natural resources; provide guidance on their use, regulation,
supply and environmental protection and conservation for a sustainable development.
Unidad de Planeacion Minero
Energetic a
ft fining &Energv Planning Division)
4 upme
planning for development and exploitation of the
energy resources, through studies, analyzes and
projections, providing information of high added
value to decision makers of public policies and
other interested groups, with the criteria of
economic, social and environmental sustainability
(Colombian Geological Service)
Through basic research and applied subsoil
geosciences, obtain information and
knowledge of the potential resources,
evaluate and monitor potential threats of
geological origin, integral management of
geoscientific knowledge, research and
control of Nucfear and radioactive, attending
to the priorities of National policies.
(National Hydrocarbon Agency)
The ANH is the authority in charge of promoting
the optimal and sustainable use of the
hydrocarbon resources of the country,
administering them integrally and harmonizing
the interests of the society. State and Industry.
(National Mining Agency)
To manage the mineral resources of the Country in
an efficient and transparent manner through
promotion, concessions, monitoring and control of
mining exploration and exploitation, in order to
maximize the contribution of the sector to the
integral and sustainable development of the country


This Ministry defines National Environmental policy and promotes the recovery,
conservation, protection, management, and use of renewable natural resources, in
order to ensure sustainable development and guarantee the right of all citizens to
enjoy a healthy environment.
The AN LA is responsible of issuing environmental
licenses when projects, construction or other
activities are subject to environmental licensing or
permits required by environmental regulations, in a
manner that will contribute to the sustainable
development of the Country.
Figure 5: Chart showing the relationships between Colombia's various mining and hydrocarbon-
related regulatory agencies.
2.5.2 Existing Regulations
Under Colombian law, foreign individuals and mining corporations involved in
mining ventures have the same rights as Colombian individuals and corporations (Latin
Lawyer, 2016). Foreign entities can register as a Colombian branch or subsidiary in order
to enjoy these rights (Latin Lawyer, 2016). Mining regulations in Colombia follow the
principle that the minerals belong to the State and may only be exploited with permission
from the relevant authority, currently the National Mining Agency (Latin Lawyer, 2016).
Beginning in 2001, Congress issued Law 685, more commonly referred to as the Mining
Code, which organizes a single 20-30 year mining contract into 3 phases: Exploration,
Construction, and Exploitation (Latin Lawyer, 2016). Exploration terms of an agreement
begin at 3 years and are able to be extended to maximum of 14 years (Latin Lawyer,
2016). Construction terms begin at 3 years and may be extended up to a maximum of 4
years (Latin Lawyer, 2016). Exploitation terms make up the remainder to the total
contract's length.
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The three contractual phases accrue different government fees and royalty
payments. During Exploration and Construction, the titleholder pays a surface fee that is
tied to the prospective mine's total acreage (Latin Lawyer, 2016). During Exploitation, the
title holder pays an annual royalty fee of 10 percent on coal mines producing more than
3 Mt/year and 5 percent on coal mines producing less than 3 Mt/year (Latin Lawyer,
Colombia has, in recent years, increased environmental regulations, in order to
better oversee foreign corporations' coal mining projects. In 2014, the Colombian
government ordered Drummond to halt close to 80,000 metric tons of daily coal exports
due to the company's failure to meet environmental standards (WSJ, 2014). For every
day Drummond's export operations were shut down, however, the Colombian
government lost an estimated $6 million in taxes and royalties (PRI, 2014).
As it relates specifically to CMM/CBM development, Colombia's regulatory
environment is facing some potential structural changes. In March of 2014, the Ministry
of Mines and Energy adopted Resolucion 90325, which allows mining companies to utilize
the methane gas released during mining operations to provide on-site energy to the mine.
However, in October of 2016, a Colombian court ruled that local and regional
governments may decide whether or not they will allow mining or other activities, including
CMM/CBM development, within their jurisdictions (Stratfor, 2016). The ruling built on an
earlier decision that overturned a 2001 law forbidding local and regional authorities from
blocking mining developments; this decision was made on the basis that the 2001 law
violated Consulta Previa (Stratfor, 2016). Consulta Previa stipulates that Colombia's
indigenous peoples must be consulted prior to any project development on ancestral
territories. Furthermore, in order for a project to be developed on such lands, a number
of requirements and agreements with indigenous peoples must be reached. Prior to the
2016 ruling, only the Ministry of Mining and Energy was able to make these decisions.
This decision is a "first of its kind" for the Colombian mining industry historically favorable
to developers.
2.6 Colombia's Coal Market Pricing
Colombian coal prices touched a 10-year low of $43 per tonne at the beginning of
2016 (Index Mundi, 2016). This price collapse was not unique to Colombia, as global coal
prices have also retracted over the past 5 years. Recently, coal prices have recovered
somewhat, and Colombian coal fetched $78 per tonne in September of 2016 (Index
Mundi, 2016). Price surges in competing export countries, in combination with newly
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improved Colombian transport infrastructure, have ensured that Colombian coal trades
at a discount to other coal sources. Early in 2016, Colombian coal was $7-8 cheaper per
tonne than Australian coal (Figure 6) (Reuters, 2016).
© 100
Historical Coal Prices (2010-2016)
South African
Figure 6: Figure showing historical Australian, Colombian, and South African coal prices. Global
coal prices collapsed beginning in 2011, but have rebounded through 2016. Colombian coal remains
cheaper than Australian and South African substitutes (World Bank, 2016).
3.0	Electricity Market
3.1	Overview
In 2014, Colombia produced over 64,000 GWh of electricity (ProColombia, 2015).
That year, EPM, Emgesa, Isagen, GECELCA, and AES Chivor, were responsible for
fulfilling 86 percent of the country's generation demand (Figure 7). The majority of these
companies' generating facilities is in Colombia's Central and Northern Departments, as
this is where over 95 percent of Colombia's population resides. Of Colombia's total power
production, 70 percent comes from hydroelectric facilities, while 10 percent comes from
thermal natural gas plants, and 7 percent from thermal coal plants (ProColombia, 2015).
The figures for natural gas and coal are expected to increase as El Nino-related
hydroelectric power shortages bolster thermal power demand.
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Colombia's Major Power
14000	Generating Agents
illll	I
/////^ ~ ~ «v *
* s
Figure 7: Figure showing Colombia's largest power generating agents, with 86 percent of the
country's power generation coming from five companies (XM, 2015).
Colombian electricity production, both hydroelectric and thermal, is expected to
steadily increase from 2016-2027. Urban population growth and economic expansion will
contribute to Colombia's rising demand for power. Likely concentrated in Colombia's
cities, the Mining and Energy Planning Unit (UPME) expects power demand to grow by
over 3 percent annually through 2027 (MaRS, 2015).
Despite access to massive hydroelectric resources, residential electricity prices in
Colombia are higher than in almost every other Latin American country. Industrial
electricity prices are also high, due to Colombia's unreliable distribution infrastructure.
Colombia's growing electricity demand will remain strong moving into the 2020's.
It remains to be seen, however, whether the nation's recent commitment to a 20 percent
greenhouse gas (GHG) emissions reduction by 2030 will shift investment from fossil fuels
towards more renewable sources.
3.2 Organization of the Electricity Sector
Colombia's electricity sector utilizes a mix of thermal and hydroelectric generation.
The majority of Colombia's effective capacity, from both hydroelectric and thermal
generators, comes from the Central and Northern departments of Colombia (Figure 8).
Colombia's largest hydroelectric plant, Emgesa's Guavio facility, annually produces 1,250
MW and is located in Cundinamarca (XN, 2018). GECELCA, the owner of Colombia's
largest thermal coal plant, has 273 MW of installed capacity (XN, 2018).
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San Carlos
1,240 MW
Pone III
Pagua plant
Total effective capacity (201B): 14,559 MW
Hydroelectric effective capacity: 9,415 MW
S. 4A\ lANDfcK
Eager SA
820 MW
1,000 MW

Effective Co pacify I MW)
T ermotlrare* S.A E.S.P
610 MW
T eimobar r anqui lla
918 MW
Termocan del aria S. C.A

Effective Capacity
Total effective capacity (2013): 14,559 MW
Thermoelectric effective capacity: 4,521 MW

352 MW (both
|| Gensa
321 MW (among
the three
Figure 8: Figure showing the geographic distribution of Colombia's current power generating
facilities. Hydroelectric capacity, Colombia's largest source (left) and thermal capacity, a growing
power source in Colombia (right) (Figure adapted from ProColombia, 2015).
Colombia's immense hydroelectric resources and regional connectedness allow
Colombia to be a net exporter of electricity. In 2013, Colombia exported 57.8 GWh of
electricity to Venezuela (85 percent) and Ecuador (15 percent) (MaRS, 2015). Export
figures are expected to increase, as a project between Colombia and Panama will be
completed in 2018. Additionally, an Andean Electrical interconnection System between
Ecuador, Peru, and Chile will soon begin construction.
3.3 Generation
3.3.1 Generation Mix
Historically, Colombia's largest source of power has been hydroelectric
generation. In 2014, hydroelectric generators produced 44,734 GWh, followed by thermal
energy with 19,044 GWh, with other sources accounting for 550 GWh (ProColombia,
In 2014, 29.6 percent of Colombia's total power generation came from thermal
power. Of this 29.6 percent, 21.5 percent was derived from natural gas, while 6.5 percent
was coal-based, and less than 1 percent came from other liquids such as diesel (Figure
9)	(ProColombia, 2015). As El Nino weather conditions threaten hydroelectric generators'
production capabilities, it can be expected that thermal production will increase (Figure
10).	Furthermore, if demand for Colombian thermal power generation continues to
increase, it is expected that natural gas, not coal, will be the accommodating fuel.
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Colombia's Electricty Capacity Mix
I Hydroelectric
I Thermal Gas
Thermal Coal
I Liquids
Gas Liquids
Figure 9: Figure showing the breakdown of Colombia's power capacity mix, with hydroelectric
facilities generating over 70 percent (XM, 2015).
Colombian Thermal Power Generation
Figure 10: Figure showing Colombia's thermal power generation (2010-2014). Given the possibility
of El Nino weather conditions decreasing hydroelectric generators' efficiency, these figures are
expected to increase (ProColombia, 2015).
3.3.2 Generation Demand and Projections
Power demand in Colombia is steadily growing, particularly in populated cities
such as Bogota, Cali, Medellin, and Barranquilla. The greater demand for power can be
seen as a result of urban population and economic growth. Although access to electricity
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is becoming more widespread, the Central, North, and Northeast regions of Colombia still
account for the majority of the demand (Figure 11).
In 2014, Colombian total energy demand grew by 4.4 percent, its greatest increase
in the past 10 years (XM, 2015). UPME expects power generation to increase by an
annual average of 3.4 percent to 76.0 TWh by 2027 (Figure 12) (MaRS, 2015).
Energy Demand by Region - Historical and Forecasted - (GWh)
Historical: 1996-2013: 4,091 Forecast:
2014-2024: 6,647
Historical: 1996-2013: 7,657
Forecast: 2014-2024: 9.625
Historical: 1996-2013: 2,165
Forecast: 2014-2024: 3,559
Historical: 1996-2013: 5,286
Forecast: 2014-2024: 7,503
Historical: 1996-2013: 2,110
Forecast: 2014-2024: 3,194
Caribbean (North)
Historical: 1996-2013: 5,636
Forecast: 2014-2024: 10,198

Historical: 1996-2013: 12,180
Forecast: 2014-2024:18,536
Source: UPME.
Figure 11: Figure showing Colombia's historical and projected regional energy demand. The center
of the country has the greatest energy demands, with the Caribbean coast expecting significant
growth (Figure adapted from ProColombia, 2015).
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Colombia's Electricity Demand Forecast
• 90265
Figure 12: Colombia's recent electricity demand growth and a high, middle, and low scenario for
projected growth (MaRS, 2015).
4.3.3 Electricity Market Pricing
Colombia's average residential energy prices are among the highest in Latin
America; prices in Colombia are higher than in Chile, Brazil, and Peru (Figure 13) (MaRS,
2015). One reason for this is Colombia's residential electricity tariff. At $0.19/kWh, it is
the highest in Latin America (MaRS, 2015). In addition, Colombia's industrial energy
prices are also high, though slightly lower than those of Chile (MaRS, 2015). A second
factor driving Colombia's electricity prices higher is the lack of a reliable distribution
system. Colombia is plagued by frequent and lengthy power outages, with the cost of
electricity losses estimated at 0.22-0.32 percent of annual GDP (MaRS, 2015). These
high prices, however, are regulated in order to be equally distributed amongst
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Average Industrial and Residential
Electricity Prices (USD/MWh)
$192 $188
~ China
¦ Canada
¦ Chile
~ Colombia
Figure 13: Figure showing how Colombia's average industrial and residential electricity prices
compare to those of Chile, China, and Canada (MaRS, 2015).
3.4 Grid Integration
Over 95 percent of Colombia's population resides in about 45 percent of the
country's land area, particularly in the Central and Northern departments. This area is
included in the National Interconnected System (NIS), while the remaining 55 percent of
the country falls into the Non-Interconnected Zones (ZNI) (Figure 14). NIS areas have
access to electricity, while ZNI areas produce energy primarily with diesel fuel. The Fund
for the Electrification of Non-Interconnected Zones (FAZNI), however, oversees three
state funds with the objective of financing the plans, programs, and projects of ZNI energy
infrastructure. As the Colombian economy continues to expand, providing ZNI areas with
electricity will become critical to the nation's growth.
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Figure 14: Figure showing the extent of the NIS versus the ZNI. The NIS, although only connecting
48 percent of Colombia's area, provides power to 96 percent of the country's population
(ProColombia, 2015).
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Although 96 percent of Colombians have access to electricity, the nation's
distribution infrastructure has significant room for improvement. Colombians experience
an average of 18.5 power interruptions per year, with an average duration of 17.7 hours
(World Bank, 2014). The value lost on these power outages, estimated to be 1.8 percent
of total power sales, is relatively high compared to other developing countries, as well as
China (1.3 percent), Chile (1.3 percent), and Canada (0.13 percent) (MaRS, 2015).
3.5 Renewable Energy Potential
Only 3 percent of Colombia's total energy supply comes from renewable energy,
not including hydropower (MaRS, 2015). The Colombian government seeks to double
that figure by 2020, as well as increase the amount of renewable energy in the total
energy mix (MaRS, 2015). Due to its climate and geography, Colombia has enormous
potential for renewable energy development.
Law 1715 of 2014 established favorable tax, customs, and financing incentives for
generating renewable energy. Wind generated energy grew by 21.9 percent from 2013-
2014, but remains only 0.1 percent of Colombia's total net generating capacity
(ProColombia, 2015). The Guajira department presents the greatest potential for wind
energy projects, as wind speeds remain around 5 m/s throughout the year (ProColombia,
2015). The nation also has the potential for significant solar energy growth, as Colombia
enjoys consistent solar radiation throughout the year. These two renewable energy
sources may soon contribute more largely into Colombia's total energy mix, as current
climate commitments begin to take effect.
Colombia is a party to the Kyoto Protocol, is involved in the United Nations
Framework Convention on Climate Change (UNFCCC), and was the first South American
country to release a detailed action plan on how they would go about reducing GHG
emissions prior to the United Nation's 2015 COP21 climate talks in Paris. Prior to 2015,
Colombia was classified as an Annex II country, meaning it had no CO2 reduction
commitments. Following the Paris Agreement, Colombia committed to reducing its
nation's emissions by 20 percent before 2030 (WRI, 2015). Additionally, Colombia's NDP
2010-2014 identified CMM/CBM as a means to utilize wasted natural resources, while
also working to reduce GHG emissions.
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4.0	Natural Gas Market
4.1	Overview
Colombia's 4.8 Tcf of proved natural gas reserves rank sixth in South America (BP,
2016). Over the last decade, demand for natural gas in the country has surged 60 percent,
forcing Colombia to transition from a net exporter of natural gas to a net importer (EIA,
2016). Imported liquefied natural gas (LNG) is expected to play an important role in
meeting the nation's increasing future natural gas demand. Three exploration and
production companies dominate Colombia's natural gas industry, with the majority of gas
production coming from the Guajira and Llanos Basins. Colombia is thought to have
significant gas shale resources, but has not yet established any commercial production.
Currently, 44 percent of natural gas production is reinjected into oil wells for enhanced oil
recovery (EOR) to offset declining production. Colombia's increasing demand for power
will also drive natural gas demand, although it will have to compete with the country's
large coal reserves. Industrial and vehicle fuel has already come online as a major driver
of Colombian natural gas demand, as 14 percent of Colombian vehicles run on natural
4.2. Recent Trends in Colombia's Natural Gas Market
Historically, Colombia consumed all of the natural gas that it produced. In 2007,
however, production began to outstrip consumption, and for a time Colombia became a
significant South American exporter (Figure 15). Colombian natural gas exports recorded
highs in 2011, reaching up to 250 MMcf/d, although by 2014 average exports were back
down to 91 MMcf/d (EIA, 2016).
Recently, deteriorating energy prices and declining reserves have forced Colombia
to begin importing natural gas from Venezuela. In 2016, planned imports accounted for
3.5 percent of Colombia's average daily consumption (Platts, 2015). Colombia's transition
from net exporter to net importer marks a shift in South American natural gas market
dynamics (OilPrice, 2015).
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Colombian Natural Gas Production and Consumption
Figure 15: Figure showing Colombian natural gas production outstripping natural gas
consumption from 2007-2015. Figure adapted from (EIA, 2016).
Conservative estimates expect Colombia's demand for natural gas to grow from
450 Bcf/year in 2015 to almost 500 Bcf/year by 2020 (ARI COGSM). Colombia's demand
for natural gas, however, may exceed conservative growth estimates, and could reach as
much as 3 percent per annum growth through 2020 (ARI COGSM). Natural gas demand
growth is expected to come from multiple industries, with the largest being the power and
transportation sectors. As of 2016, 32 percent of taxis in Bogota ran on compressed
natural gas (CNG) (AAPG, 2016). CNG stations are emerging throughout Colombia, as
vehicle conversions to CNG increased at an average annual rate of 12 percent from 2010
to 2014 (AAPG, 2016).
4.3 Natural Gas Supply
4.3.1 Conventional Domestic Natural Gas Production
Colombia holds the majority of its natural gas reserves in two basins, the Guajira
and Llanos basins (Figure 16). The Guajira Basin is located in northern onshore and just
offshore Colombia and has historically accounted for the greatest percentage of domestic
natural gas production.
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Guajira Basin
a* v-u Mac** * mm*
Llanos Basin
Figure 16: Figure showing Colombia's major petroleum-bearing basins. The Llanos Basin is in
eastern Colombia and the Guajira Basin is in northern onshore and offshore Colombia (Seeking
Alpha, 2015).
The Guajira Basin holds 1.02 Tcf of proved natural gas reserves, compared to
eastern Colombia's Llanos Basin's 3.9 Tcf of proved reserves (Figure 17) (ARI COGSM).
In 2014, the Guajira Basin accounted for 183 Bcf of Colombia's natural gas production
and the Llanos Basin produced 199 Bcf of natural gas (Figure 18) (ARI COGSM).
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Colombian Natural Gas Reserves (2014)
Figure 17: Figure showing Colombian natural gas reserves (Bcf), with the majority of proved
reserves found in the Llanos and Guajira basins. Total proved reserves are estimated to be 5,510
Combined, Ecopetrol, Equion Energfa (a partnership between Ecopetrol and
Talisman Energy), and Chevron account for the majority of Colombian natural gas
production (EIA, 2016). Ecopetrol, Colombia's largest oil and gas company by revenue,
profit, assets, and equity, is the fourth-largest oil and gas company in Latin America (pwc,
2014). Ecopetrol operates the Cupiagua and Cupiagua Sur fields in the Llanos Basin. In
2015, Ecopetrol produced in excess of 280 Bcf (Platts, 2015). Equion Energfa, formed in
2010 after Ecopetrol and Talisman Energy acquired BP Colombia's Llanos Basin assets,
operates the Cusiana, Cusiana Norte, and Cupiagua Liria fields. Equion Energfa
produces just over 36 Bcf per year of natural gas (Equion, 2016). Chevron, also in
partnership with Ecopetrol, operates the Caribbean Chuchupa offshore field in the Guajira
Basin, as well as the nearby onshore Ballena and Riohacha fields. The Caribbean
Chuchupa is the largest non-associated natural gas field in Colombia (EIA, 2016). In
2015, Chevron produced an estimated 60 Bcf of natural gas (Chevron).
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Llanos	Guajira	Other
Figure 18: Figure showing Colombian natural gas production (Bcf) by geologic basin. Total natural
gas production in 2014 was 448 Bcf (ARI COGSM).
Of Colombia's two major natural gas producing basins, the Guajira Basin is far
more mature. Conventional Guajira Basin natural gas production is already beginning to
decline, with production estimates falling from 0.37 Bcfd in 2016 to 0.19 Bcfd by 2020.
On the other hand, Llanos Basin production is expected to increase until 2022. Production
estimates for the Llanos in 2016 are 0.63 Bcfd, while production estimates for 2022 are
1.01 Bcfd. Increasing Llanos Basin production is expected to offset Guajira Basin
declines, with total Colombian natural gas production increasing until 2022. However,
unless unconventional gas (CBM/CMM, shale gas, etc.) comes online by 2022, gas
production will start to decline and Colombia will eventually be a net importer of gas.
4.3.2 Midstream Infrastructure
Due to Colombia's geography with high peaks and dense jungles, natural gas
infrastructure and transportation have always proved challenging. Furthermore, attacks
on oil and gas infrastructure often disrupt natural gas transport. Colombia boasts 4,991 km
of natural gas pipeline, and several companies have committed to investing in midstream
projects (CIA, 2013). The three major natural gas pipeline systems are the Ballena-
Barrancabermeja, linking Chevron's northeast Ballena field to central Colombia; the
Barrancabermeja-Nevia-Bogota line, integrating Colombia's capital city; and the
Mariquita-Cali line, which connects the western Andean foothills (Figure 19) (Oxford,
2014). Transportadora de Gas Internacional (TGI), a subsidiary of Grupo Energia de
Bogota, is the largest pipeline operator in Colombia, overseeing approximately 3,700km
of pipe (EIA, 2016).
Colombian Natural Gas Production (Bcf) (2014)
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Ui O V i/
	 ¦... ¦.! li.1 ¦ i:
•»« ffedoasect'planned crude peuoteum
	 !/•?::=:''! .
Figure 19: Figure showing oil and gas midstream infrastructure throughout Colombia (Platts,
In 2007, the Trans-Caribbean Gas Pipeline, also known as the Antonio Ricaurte
Pipeline, was opened, linking Chevron's Ballena field in the northeast portion of the
Guajira Basin to western Venezuela (EIA, 2016). Venezuela's Petroleos de Venezuela
(PdVSA) financed the $335 million pipeline and, in 2011, the pipeline was extended
across Colombia to Panama and Ecuador (EIA, 2016). Pipeline throughput peaked at 250
MMcf/d in 2014, but has averaged 91 MMcf/day since 2014 (EIA, 2016).
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Pipeline expansion has been a catalyst for Colombia's growing natural gas
demand. As of 2016, 670 out of the total 1,123 Colombian municipalities have access to
natural gas via pipeline (AAPG, 2016). Colombia's largest cities, Bogota, Medellfn, Cali,
and Barranquilla are all included in these natural gas-connected areas. Eight million
households, about 81 percent of Colombia's total, currently have natural gas access, with
an additional one million to come online by 2018 (AAPG, 2016).
4.3.3	Liquefied Natural Gas (LNG)
Colombia is well-positioned to take advantage of the emerging LNG industry. In
November of 2016, Colombia will begin importing LNG from Mitsui & Co. at a terminal in
northeastern Cartagena. The Hoegh Grace import terminal at Cartagena is estimated to
have capacity for 400 MMSCFD. The import terminal expects to unload between six to
twelve tankers a year, depending on power plant demand (Bloomberg, 2016).
4.3.4	Unconventional Shale Gas
Colombia is thought to hold world-class shale source rocks, offering significant
opportunities for unconventional shale oil and gas developments. The Middle Magdalena
Valley (MMV), Eastern Cordillera, Llanos, and Catatumbo Basins appear to show the
most promising geology for shale gas development (Figure 20). ExxonMobil,
ConocoPhillips, Ecopetrol, and Royal Dutch Shell all own shale oil and gas lease blocks
in the MMV Basin. While many of these lease blocks are oil-focused, large amounts of
associated gas are expected to be produced (ARI, 2014.1). A number of exploration wells
were set to be drilled in 2015, but ExxonMobil, ConocoPhillips, and Royal Dutch Shell
were forced to cut Colombian spending amid declining oil prices. Commercial shale
production has not yet been realized.
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© 2013. Advanced Resources
International. Inc.
Scott Stevens sstevens@*dv-fes com
Keith Moodhe kmoodhe@adv.res com
~ Prospective Basin
¦ CKy
Figure 20: Shale oil and gas basins in Northern South America (figure adapted from ARI, 2014).
4.4 Structure of Colombia's Natural Gas Industry
Colombia's natural gas demand is dominated by two major draws: reinjection gas
and pipeline gas (Figure 21). About half of Colombia's natural gas is reinjected into
producing oil fields in order to increase reservoir pressure, offset declining oil well
production, and to mitigate low energy prices (EIA, 2016). Pipeline gas is delivered to
various parts of Colombia, to be used by the power sector, as an industrial fuel, and in
the transportation sector. The proportion of Colombia's natural gas committed to
reinjection and pipeline projects is expected to grow. As Colombia's aging oil fields
produce fewer hydrocarbons, greater amounts of natural gas will be needed for reinjection
to maintain reservoir pressure and stem the decline of oil production. Likewise, as
Colombia's demand for industrial and vehicle fuel increases, more natural gas will be
required to meet this demand. Colombia's fleet of 530,000 natural gas-powered vehicles
is already the 7th largest in the world (AAPG, 2016). This figure, accounting for an
estimated 14 percent of Colombia's total vehicles, is expected to grow, however, as
industrial vehicles such as garbage trucks and bus rapid transit (BRT) systems convert
to run on natural gas (AAPG, 2016).
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Colombia's 2015 Natural Gas Balance
- Transformed Gas
Pipeline Gas
¦ Field Consumption
¦ Plant Gas
- Flared Gas
¦ Reinjection Gas
1% 5% 3%
Figure 21: Figure depicting Colombia's 2015 natural gas balance, with the majority of natural gas
being utilized as reinjection gas (44 percent). Figure adapted from (ANH, 2015) data.
4.5 Natural Gas Market Policy and Pricing
4.5.1	Policy and Reforms
Colombia historically offered attractive regulations in order to encourage both
domestic exploration and to attract foreign investment. When the National Hydrocarbons
Agency (ANH) was formed in 2003, it took over the regulatory role previously held by
state-owned Ecopetrol. In addition, following the creation of the ANH, it was made
possible for private companies to own 100 percent stakes in oil and gas fields with less
than 60 million barrels of reserves (Open Oil, 2012).
In March of 2011, the Colombian government published a decree outlining plans
to increase domestic natural gas production, specifically production from shale and
CMM/CBM fields (EIA, 2016). These policies, combined with increasing natural gas
demand in several sectors, have made natural gas a priority for the Colombian
4.5.2	Foreign Direct Investment (FDI)
According to a 2010 report by the US-based Council of the Americas, Colombia
has developed its energy sector over the last decade into one of Latin America's foremost
destinations for foreign investment in the oil and gas sector (Open Oil, 2012). From 2005-
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2013, Colombia's FDI grew at a compound annual growth rate (CAGR) of 22 percent
(Figure 22) (Ecopetrol, 2013). While 2003 marked the modernization of Colombian oil and
gas policy, auctions for Colombian onshore and offshore blocks in 2008, 2010, 2012, and
2014 were turning points for Foreign Direct Investment (FDI). The four auctions resulted
in over 200 onshore and offshore block contracts signed, as well as close to $8 billion in
FDI (pwc, 2014).
Foreign Direct Id vestm ent in Oil A Gas
Figure 22: Figure depicting increasing FDI in Colombian oil and gas projects from 2005-2013, with
a 22 percent CAGR. Figure adapted from (Ecopetrol, 2013).
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Additionally, in 2012, Colombia started a sovereign wealth fund, focused on
stability and savings, using royalties from extractive industries (USDOS, 2015). The fund
is administered by the Central Bank, is able to administrate up to 30 percent of annual
royalties, and, as of December 2014, the fund had saved approximately $2.5 billion
(USDOS, 2015).
4.5.3 Natural Gas Market Pricing
Colombia's Regulatory Commission of Energy and Gas (CREG) was created by
Article 74 of Law 142 of 1994 in order to regulate public services, including electricity and
natural gas prices (CREG, 2016). Urban areas in Colombia are classified as one of six
socioeconomic strata. The two lowest natural gas prices are available to citizens who do
not use much electricity. These citizens receive natural gas at a subsidized price, with the
subsidies financed by citizens in the two uppermost socioeconomic strata (CREG, 2016).
Citizens who are in the middle two socioeconomic tiers receive natural gas at market
prices (Figure 23).
Natural Gas Prices in Colombia's
Socioeconomic Strata
Dec-12 Jun-13 Dec-13 Jun-14 Dec-14
Figure 23: Approximated natural gas prices (US$/MMBtu) in Colombia's various socioeconomic
strata. Figure adapted from data via (NATURGAS, 2014).
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Due to the remote nature of certain regions of Colombia, access to natural gas,
whether subsidized or not, can be expensive. Average market prices, consequently,
remain significantly higher than those in the U.S. Average market prices for Colombian
citizens purchasing natural gas at the end of 2014 were $8.2/MMBtu (NATURGAS, 2014).
The highest two socioeconomic tiers, however, pay large contributions in order to ensure
affordable natural gas reaches the lowermost socioeconomic strata.
5.0	Coal Mine Methane (CMM) Market
5.1	Overview
Colombia has extensive coal reserves and, by extension, is thought to hold
significant coal mine and coalbed methane (CMM and CBM) as well. National studies
currently estimate its methane reserves to be between 11-35 Tcf, although not all of the
gas is considered economically recoverable (ANH, 2011). U.S.-based Drummond
Company operates two lease blocks, one in Guajira and one in Cesar, where they are
conducting CMM/CBM exploration programs. Additionally, in 2017, the USTDA published
the results of a CMM/CBM feasibility project in Cordoba (USTDA, 2015). The objective of
the study was to inform GECELCA of the project's potential before the company makes
a drilling decision. GECELCA hopes the project will increase regional methane utilization,
help supply the Colombian natural gas market, and reduce the area's greenhouse gas
emissions (USTDA, 2015).The results of the study estimate that the project could be
developed in such a way that between 30.9 MMtC02e and 34.7 MMtC02e will not be
emitted to the atmosphere, if best practices are used to reduce GHG emissions during
the entire life cycle of the project (GECELCA, 2017).
Characteristics that typically indicate promise for developing a CMM project are
identified in Table 3.
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Table 3: Table showing the most important parameters in determining a CMM prospect's Gas in
Place and Economic Gas Deliverability (ANH 2011).
Characteristics Determining
Gas in Place
Characteristics Determining
Economic Gas Deliverability
• Gas Content
• Coal Seam Thickness
- Coal Rank
• Permeability
- Coal Composition
• Coal Seam Spacing
- Maturation Process
• Coal Seam Depth
• Total Coal in Place
• Hydrology
- Areal Coal Extent
• Depositional Environment
- Net Coal Seam Thickness
• Saturation
• Storage Capacity
• Geologic Structure
- Isotherm Evaluation
• Reservoir Pressure
- Saturation

There are a number of challenges currently facing Colombian CMM project development,
including limited data on reservoir properties (e.g., gas content, permeability) and a lack
of infrastructure to utilize the gas, especially for mines located in remote areas.
Nevertheless, CMM production and utilization presents Colombia with an opportunity to
increase mine safety, reduce its greenhouse gas emissions, and help meet the country's
increasing natural gas demand.
5.2 Current CMM and CBM Projects and Coal Mine Methane Emissions
Colombia's CMM/CBM industry is in its infancy. Despite the nation's large
CMM/CBM reserves, significant commercial utilization has yet to be realized (Table 4). In
2004, U.S.-based Drummond Company, Inc. purchased a lease block for CBM
exploration in Cesar (Figure 24). The lease block, near Drummond's La Loma and El
Descanso mines, encompasses 392,515 acres and lies in close proximity to Drummond's
current coal production and infrastructure (Drummond, 2016; GMI, 2015). Additionally, in
2006, Drummond acquired a second CBM exploration block in Guajira. The second block
totals 77,833 acres and holds an estimated 2.2 Tcf of CBM reserves (Drummond, 2016;
GMI, 2015). Development of the second block is currently on hold due to a dispute
between ANM and ANH regarding overlapping concessions.
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Table 4: Comparison estimated quantities of Mineable Coal in Place (Gint) and Potential Total Gas
in Place (Tcf) throughout Colombia (ANH 2011).
Coal in Place
Potential Total
Gas in Place
Valle del Santander
Norte de Santander
Total Recovery
Rio Ranclieria
31,498 ha
Contract effective date:
14 March, 2006
State company:
Exploration phase WI:
DLTD 100%
Production phase WI:
DLTD 70% -
Coal Bed Methane
11 Production wells
(Patilla 1-11)
Production status :
Shut down wells.
Production testing
Development Phase:
30 Years

La Loma
158,846 ha
Contract effective date:
State company:
Exploration phase WI:
DLTD 100%
Production phase WI:
DLTD 100%
Coal tied Methane
23 Gas content tests
5 Production wells
Production status :
Pumping tests
Development phase:
24 Years
Figure 24: Drummond Company, Inc.'s two CBM exploration lease blocks. These two blocks are
Colombia's current major CMM/CBM plays. Figure adapted from ANH, 2011.1.
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The only company actively pursuing a CBM project in Colombia is Drummond Coal
at the La Loma block, where they operate their pilot project (ANH, 2011; GMI, 2015). The
pilot project is meant to measure methane emissions at Drummond's La Loma/Pribbenow
Mine, and Drummond has signed a contract with Ecopetrol to extract CBM from the area
(GMI, 2015). Details on when CBM will begin to be extracted are not available. Because
there are no commercial CMM/CBM utilization projects in Colombia, coal mines continue
to produce significant annual emissions, which have been rising at a rate of 40-50 percent
per year over the last two decades, as shown in Table 5.
Table 5: Table showing Colombia's coal mine methane (CMM) emissions (GMI, 2015).

*Global Warming Potential (100-year) used is 25, "Projected.
5.3 Regulatory and Legislative Environment
Currently, there is no regulation or law preventing a project developer from
applying for a license to explore or produce CMM/CBM; an unconventional license issued
by ANH provides the rights to explore for unconventional hydrocarbons. Furthermore, if
exploration of CMM/CBM was not the target of the original hydrocarbon license
application, a petition can be submitted to the ANH for permission to include coal
associated gas contained by the coalbeds during the exploration phase (GMI, 2017).
Therefore, if owners of existing coal licenses wish to sell CMM/CBM gas or electricity,
they must acquire an unconventional hydrocarbon license covering the coal lease.
Once a hydrocarbon license is secured, the National Code of Natural Renewable
Resources, or Decree 2811 of 1974, requires that the developer first obtain an
environmental permit. Decree 1220 of 2005 issued by the Ministry of Environment and
Sustainable Development (MADS) establishes the basic procedures and requirements to
obtain an environmental license for hydrocarbon exploration and production (GMI, 2017).
Colombia's National Development Plan (NDP) 2010-2014 identified the mining
sector as a national locomotive for economic growth, specifically mentioning CMM/CBM
projects as an avenue for expansion (MinMinas, 2010). One of NDP 2010-2014's major
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objectives was to develop more sustainable mining practices and to better utilize
previously wasted natural resources (MinMinas, 2010). In regards to CMM/CBM, NDP2
2010-2014 aimed to allow drainage and utilization of:
1)	Methane from open-pit and underground coal mines;
2)	Methane by means of ventilation systems (VAM) in underground coal
3)	Methane in abandoned underground coal mines (AMM);
4)	Burning methane through ventilation systems (VAM) in underground coal
As a result of NDP 2010-2014 and increasing natural gas demand, the Colombian
government published a decree in 2011 describing its plan to increase domestic natural
gas production, particularly from gassy coal mines (EIA, 2016). Decree 4923 set forth a
40 percent reduction in government royalties applicable to unconventional hydrocarbons,
which includes CBM (GMI, 2017). Additionally, 2015 and 2016 witnessed favorable
regulatory developments regarding Colombia's CMM/CBM industry's future. Article 59 of
Decree 1886 (2015) grants that the mine owner may extract gas to improve mine safety
and utilize the gas on site. However, for a large-scale, commercial CMM projects,
developers still must obtain the requisite licenses.
In 2015, as party to the Kyoto Protocol, Colombia committed to working towards
reducing its carbon emissions by 20 percent by 2030, although CMM was left out of
Colombia's Kyoto commitment and is not part of their NDC. One issue that could affect
CMM development is a 2016 Colombian court ruling that empowers local and regional
governments to block mining activities within their jurisdictions (Stratfor, 2016). Given this
recent legislation, it remains to be seen what the net impact on CMM/CBM investment
will be.
5.4 Challenges to CMM Projects
One of the biggest issues facing Colombian CMM development is that Colombia's
largest coal mines are surface mines. CMM potential at surface mines is limited to pre-
mine drainage. However, there are an estimated 3,000 underground coal mines that
annually produce 6 Mt, according to the Colombian National University (GMI, 2011). Many
2 Aadapted from MinMinas, 2010.
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of these mines reach depths no greater than 600m and are dangerously gassy (GMI,
2011). These mines may provide opportunities for methane utilization, as many of them
only have basic ventilation systems in place. Unfortunately, these small mines have
limited technical and financial capability to conduct a CMM project.
Lastly, Colombian coal projects have been scrutinized and protested in recent
years, with Colombian citizens resisting relocation and development. Drummond and
Cerrejon Coal Company both came under criticism in 2016 for pollution and displacement
charges (London Mining Network, 2016). With recent legislation empowering local and
regional governments, CMM project developers may face the challenge of meeting local
peoples' demands.
5.5 Benefits of Implementing CMM and CBM Projects in Colombia
If Colombia is able to economically implement widespread CMM/CBM utilization,
significant benefits would accrue. CMM/CBM utilization increases mine safety. Colombia
has experienced a number of tragic coal mine explosions since 2010, and increasing
CMM/CBM utilization will help mitigate this risk. Secondly, reducing the amount of
methane escaping into the atmosphere will help Colombia to meet its 20 percent carbon
emissions reduction goal by 2030. In the absence of CMM/CBM utilization projects, GHG
emissions from coal mines can be expected to continue increasing annually. Third,
CMM/CBM utilization can supplement Colombia's growing natural gas demand.
Colombia's demand for natural gas is projected to increase from 450 Bcf/yr. in 2015 to
almost 500 Bcf/yr. by 2020 (ARI COGSM). Lastly, CMM/CBM project implementation will
increase Colombian coal producers' revenue and ensure that the nation's mining sector
remains an engine for national economic growth.
6.0 References
1.	AAPG (2016): Ramirez, Miguel. "A Natural Gas Revolution in Colombia."
December, 2016.
2.	ARI COGSM: Advanced Resources International, Inc.'s Colombia Oil and Gas Model
(COGSM). Taylor Malone. 2016.
3.	ARI (2014): "Outlook for Shale Oil and Gas Development Middle Magdalena Valley Basin,
Colombia." Velio A. Kuuskraa. Taylor Malone. Prepared for Unidad de Planeacion Minero
Energetica - UPME. Bogota, Colombia. July 08, 2014.
4.	ARI (2014.1): "Strengthening UPME's Energy Analysis and Planning Capability." Velio A.
Kuuskraa. Taylor Malone. Prepared for Unidad de Planeacion Minero Energetica - UPME.
Bogota, Colombia. July 16, 2014.
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5.	ANH (2011): "Potential Resources of Unconventional Hydrocarbons in Colombia." Rodolfo
Guzman. ANH Unconventional Hydrocarbons Workshop. Bogota, Colombia. June 8, 2011.
6.	ANH (2011.1): "Technology analysis and Promotion Strategy for Coalbed Methane
Developments in Colombia." Arthur D. Little, Inc. Bogota, Colombia. June 9, 2011.
7.	ANH (2015): Statistics Sector: Production Statistics. Gas Balance Production 2015.
8.	Bloomberg (2015): "BHP Colombia Mine CEO Seeks Cost Savings Amid Coal Price
Slump." BP (2016.1): "Statistical Review of World Energy." June, 2016.
9.	BP (2016): "Energy Outlook." June, 2016.
10.	BP (2016.1): "Statistical Review of World Energy." June, 2016.
11.	BP (2018): "Statistical Review of World Energy." June, 2018.
12.	Bloomberg (2016): "Mitsui to Supply Colombia Its First Liquefied Natural Gas Cargo." May
27, 2016.
13.	Cerrejon (2013): Indicators. 2013.
14.	Chevron (2015): Colombia. 2015.
15.	CIA (2013): The World Factbook 2013-14. Washington, DC: Central Intelligence Agency,
16.	CREG (2016): Sectors we regulate: Natural Gas. 2016.
17.	Drummond (2016): Our Operations: Oil & Gas. 2016.
18.	Ecopetrol (2013): "Ecopetrol's onward strategy to tackle Colombia's energy challenges."
Nelson Castaneda. NOC Congress. London, England. June 2013.
19.	EIA (2016): Colombia Country Analysis Brief. Energy Information Administration. Retrieved October, 2016.
20.	EIA (2016.1): "U.C. coal exports declined 23% in 2015, as coal imports remained steady."
March 7, 2016.
21.	EPA (2017): Pre-Feasibility Study for Methane Drainage and Utilization at the San Juaquin
Mine, Antioquia Department, Colombia. GMI.
22.	Equion (2016): Our operations. 2016. Spanish.
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23.	GECELCA (2017): Coal Mine Methane Recovery in Cordoba, Colombia - prepared by
Raven Ridge Resources, Incorporated -forGecelca S.A. E.S.P.
24.	GMI (2011): PowerPoint Slides. Global Methane Initiative. U.S. EPACoalbed Methane
Outreach Program.
25.	GMI (2015): Coal Mine Methane Country Profiles. US Environmental Protection Agency
Coalbed Methane Outreach Program In support of the Global Methane Initiative (GMI).
June, 2015.
26.	GMI (2017): Legal and Regulatory Status of CMM Ownership in Key Countries:
Considerations for Decision Makers. GMI.
27.	Index Mundi (2016): "Colombia." Colombia - Country Profile - 2016. CIA World FactBook,
9 Oct. 2016. Web.
28.	Jahnig (2007). Coal Deposits of Colombia. Andrea Jahnig. Master Thesis. Freiberg,
Technische Universitat Bergakademie Freiberg.
29.	Latin Lawyer (2016): Colombia. Dentons Cardenas & Cardenas. April 4, 2016.
30.	London Mining Network (2016): "Why does the Colombian coal industry need help from a
London lobby group?" June 30, 2016.
31.	MaRS (2015): "Market Information Report: Colombia." Simeran Bachra, Mieka Buckley-
Pearson, Nina Da Nobrega Garcia, and Meg McQuillan. Advanced Energy Centre. MaRS
Cleantech. Ontario, Canada.
32.	Mining Atlas (2016):
33.	MinMinas (2010): "Development Action for the Mitigation Plan for the Energy Sector."
Ministry of Mines and Energy. 2010. Spanish.
34.	NATURGAS (2014): Prices of natural gas city gate. 2014.
35.	Norton Rose Fulbright (2011): "The Creation of a National Mining Agency." September,
36.	OilPrice (2015): "As Prices Tank, This Natural Gas Exporter Became A Net Importer."
November 25, 2015.
Prices-Tank-This-Natural-Gas-Exporter-Became-A- Netlmporter.html.
37.	Open Oil (2012): "Colombia Oil Almanac." 2012.
38.	Oxford (2014): Oxford Business Group. The Report: Colombia 2014: 2. London: Oxford
Business Group, 2014. Print.
39.	Peace (2016): "Communities in Cesar struggle to be heard in public hearing on coal
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40.	Platts (2014): "Colombia's oil output reaches coveted 1 million b/d in 2013; well, rigs
counts fall against 2012." January 8, 2014.
41.	Platts (2015): "Colombia to begin natural gas imports in early 2016: Ecopetrol." November
23, 2015.
42.	PRI (2014): "Why Colombia halted a US company's coal exports."
43.	ProColombia (2015): "Electric Power in Colombia: Power Generation." Bogota, Colombia.
44.	pwc (2014): "Colombia Oil & Gas Industry 2014: An Overview." 2014.
45.	Raven Ridge Resources (2015): "Coal Mine Methane Developments in the United States
and Globally." Felica Ruiz. Jayne Somers. Candice L. M. Tellio. 2015.
46.	Reuters (2016): "Australian coal prices plummet as Colombian cargoes head to Asia."
47.	Seeking Alpha (2015): "Colombia's Emerging Oil Crisis - Is Its Economic Miracle In
Decline?" March 7, 2016.
48.	Stratfor (2016): "Colombia: Court Expands Authority to Block Mining Projects." October 12,
49.	USDOS (2015): "Colombia Investment Climate Statement." 2015.
50.	USGS (2006): Tewalt, Susan J., Robert B. Finkelman, Ivette E. Torres, and Fiorella
Simoni. "Colombia." World Coal Quality Inventory: South America. By Alex W. Karlsen.
Reston, VA: U.S. Geological Survey, 2006. 132-57. Print.
51.	USTDA (2015): "USTDA Advances Coal Mine Methane Recovery in Colombia." June 25,
52.	World Bank (2014): World Bank Group Benchmarking Analysis of Electricity Distribution
in Latin America and the Caribbean, and the University of Waterloo. 2014.
53.	World Bank (2016): "World Bank Commodity Price Data (The Pink Sheet)." November
54.	World Coal (2016): "Colombian coal production to grow to 2020." June 20, 2016.
55.	WRI (2015): "Colombia First South American Country to Release New Climate Plan Ahead
of Paris." country-release-new-
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56.	WSJ (2014): "Colombia Orders Drummond Coal to Halt Port Operations."
57.	XM (2015): Informe de operation del SIN y administration del mercado. INS operation
information. Spanish.
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7.0 Appendix A
Puerto Prodeco
Puerto Drummond a—
A ^
Puerto Nuevo°—i
sprc ~	 & a £i
rSociedad Portuaria
de Santa Marta
Puerto Bolivar A 	
La Guajira
(9) Riohacha
Santa Marta
Cienaga X	
El Descakso
La Francia d-
El Hatilio ^
La Cesar
—n Cerrejon
(Xstrata, BHP Bliliton,
—a Calenturitas
La Jagua
Figure 25: Figure showing a detailed map of Colombia's coal mines and Colombia's coal mine
operators. Over 90% of Colombia's coal production comes from the northern departments of
Guajira and Cesar (GMI, 2015; Cerejon, 2013; Mining Atlas, 2016). El Cerrejon, La Jagua, and La
Loma (Mina Pribbenow) are Colombia's three largest mines. Figure adapted from Peace (2016).
Table 6: These three mines account for over 90% of Colombian coal production (GMI, 2015;
Cerejon, 2013; Mining Atlas, 2016).

Mine Owner
(Mt per
Cerrejon Zona Norte
Cerrejon Coal
Carbones del Cerrejon
Cerrejon Coal
3.7 (2010)
El Cerrejon Corte
Cerrejon Coal
5.6 (2010)
Mina Pribbenow/La
La Jagua
Giencore/ Prodeco
La Jagua
Giencore/ Prodeco
0.9 (1994)
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