Colombia's Gas Future Hinges on Ecopetrol's Strategic Gambit After Shell's Exit

The withdrawal of Royal Dutch Shell from three critical offshore gas projects in Colombia’s Southern Caribbean region marks a pivotal moment for the country’s energy sector. With Shell’s exit finalized in late 2023, state-owned Ecopetrol now faces the challenge of maintaining continuity for projects deemed vital to Colombia’s energy transition. The move underscores broader industry shifts as majors prioritize high-return assets, leaving national oil companies (NOCs) to navigate complex projects with longer timelines and higher risks.

Shell’s Strategic Shift: Portfolio Rationalization Over Project Doubts

Shell’s departure was driven by its global portfolio rationalization—not concerns over the technical or economic viability of the Col 5, Purple Angel, and Fuerte Sur blocks. These assets host major gas discoveries like Kronos-1, Purple Angel 1, and the Gorgon field, which Ecopetrol has labeled “technically and economically viable priorities for the country.” Shell’s decision aligns with its broader strategy to focus on high-margin opportunities, such as Brazil’s Gato Do Mato field, where it remains partnered with Ecopetrol and TotalEnergies.

Ecopetrol’s Gambit: Balancing Risk and Reward

Ecopetrol now faces the dual challenge of advancing these projects while managing financial and operational hurdles. Key steps include:
- Infrastructure Connectivity: Securing connections to Colombia’s National Transportation System to commercialize Gorgon’s gas for domestic use.
- Timeline Management: The Gorgon project’s development is slated for completion by mid-2029, with production expected between 2031–2032. This 6–7 year horizon requires sustained investment and risk mitigation.
- Funding Strategy: Ecopetrol plans a $2 billion debt raise in 2025—$4.26 trillion pesos—to finance strategic projects, including potential acquisitions or partnerships.

Ecopetrol’s stock has fluctuated amid these developments, reflecting investor uncertainty about its ability to manage such ambitious projects alone.

Brazil Collaboration: A Glimmer of Partnership Continuity

Despite the Southern Caribbean exit, Shell’s ongoing collaboration with Ecopetrol and TotalEnergies in Brazil’s Gato Do Mato field—a project with $5 billion in planned investments for 2025—demonstrates that the partnership remains strategic. This highlights Shell’s selective approach: exiting lower-priority assets while doubling down on higher-return ventures.

Broader Industry Trends: Colombia’s Declining Attractiveness to Majors

Shell’s move mirrors broader trends in Colombia’s oil and gas sector, where majors like ExxonMobil and Chevron have reduced operations in recent years. The Southern Caribbean projects exemplify the challenges NOCs face in justifying costly offshore infrastructure—subsea pipelines, processing plants—without major partners. Ecopetrol’s ability to secure financing and technical expertise will be critical to overcoming these barriers.

Investment Implications: Risks and Opportunities

Risks:
- Long-Term Uncertainty: The 2031–2032 production timeline exposes investors to geopolitical, regulatory, and market risks over nearly a decade.
- Cost Overruns: Offshore projects often face budget overruns; the $2 billion debt raise may prove insufficient if complexities arise.

Opportunities:
- Domestic Demand Growth: Colombia’s gas consumption is projected to grow by 4% annually through 2030, driven by power generation and industry needs.
- Strategic Acquisitions: Ecopetrol’s capital raise could position it to acquire undervalued assets from retreating majors, bolstering its reserves and operational scale.

Conclusion: A High-Stakes Gamble for Colombia’s Energy Future

Ecopetrol’s efforts to keep the Southern Caribbean projects alive represent a critical test of its capacity to lead Colombia’s energy transition. With gas positioned as a “pillar” of this shift, the company must balance aggressive financial planning with technical execution. The $2 billion debt raise and 6–7 year development timeline underscore the scale of the challenge.

While risks are significant, the stakes are existential for Colombia’s energy security. A successful outcome could secure a domestic gas supply that reduces reliance on imports, supports industrial growth, and positions Ecopetrol as a regional energy leader. Failure, however, could leave Colombia dependent on costlier alternatives and further erode investor confidence in its NOC. For now, the jury remains out—but the next two years will be decisive.

As Ecopetrol navigates this complex landscape, investors must weigh the long-term potential of Colombia’s gas reserves against the very real execution risks. The Southern Caribbean projects are not just about energy—they’re a referendum on Ecopetrol’s ability to thrive in an evolving industry.