Promigas S A E S P : ​ Promigas Presents The XXIII Report On The Natural Gas Sector In Colombia

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PROMIGAS PRESENTS THE XXIII REPORT ON THE NATURAL GAS SECTOR IN COLOMBIA

This year has been crucial for natural gas, so I would like to highlight three relevant milestones in our industry:

· The natural gas sector is celebrating 50 years of contribution to Colombia, thus reaffirming its importance as a fundamental part of the energy transition process, contributing to the reduction of poverty and inequality, and acting as a vehicle for social change and economic growth.

· The European Parliament ratified natural gas under the category of green energy sources, in the list of environmentally sustainable economic activities, which ensures that this energy source is the best ally on the planet to successfully move towards energy transition and carbon neutrality.

· Colombia attained the milestone of more than 10 million residential users with access to natural gas, representing nearly 70% of Colombians, which ratifies the success of the natural gas massification process in the country, and positions Colombia as a benchmark for the natural gas industry in Latin America. Residential coverage grew from 6% to 67% in just 30 years. This has been a huge social revolution, since more than 85% of these users fall under socio-economic levels 1, 2, and 3.

Barranquilla, September 30, 2022. The twenty-third version of the 2022 Natural Gas Sector Report presented by PromiGas indicates that, in terms of distribution, the total universe of connected users is 10.6 million, of which 10.4 million are residential, and 85% of them belong to socio-economic levels 1, 2, and 3. For socio-economic level 1 users, this represents savings in the range of 47,000 to 61,000 COP per month compared to the use of liquefied petroleum gas (LPG), thereby substantially improving the quality of life of lower-income Colombians.

The sector is fully committed to continuing its expansion, including increasing the growth rate of approximately 230,000 households on average each year in the last 4 years, so that the 1.7 million families that still use open firewood and other fuels for cooking have access to cleaner and more efficient energy sources that do not pollute their homes and pose health hazards for their members.

The President of Promigas, Juan Manuel Rojas, stated that "the natural gas sector is celebrating 50 years of contribution to the country, thus reaffirming its importance as a fundamental part of the energy transition process, contributing to the reduction of poverty and inequality, and acting as a vehicle for social change and economic growth.

Natural gas is an energy source of strategic value for more than 36 million Colombians,as well asfor the country's industrial and the electricity sector: (i) it provides security and reliability to the national energy system by generating 21% of Colombia's primary energy demand; (ii) it is crucial to improve the quality of life of Colombians, with more than 10 million households using natural gas (~67% of Colombians) and more than 3,000 buses, 190,000 cars, and ~1,000 trucks running on this fuel; (iii) stove combustion using natural gas has allowed millions of households to replace firewood for cooking, thereby preventing the destruction of ecosystems and respiratory diseases arising from the smoke generated by solid fuels, and generating savings for the health sector; (iii) it plays a key role in the path towards decarbonization (generating electricity with natural gas produces 50% less GHG emissions than coal, and gas-powered vehicles emit 30% fewer grams of CO₂/Gigajoule during combustion vs. diesel); (v) it serves as raw material to locally produce fertilizers, which contributes to the advancement of the countryside as the first link in industrial development; and (vi) it is the main source of hydrogen, which is the energy source of the future.

At the end of 2021, proven natural gas reserves in Colombia experienced a slight increase, totaling 3,164 Gcf. According to the Ministry of Mines and Energy, in 2021, the country had enough proven gas reserves for 8 years of self-sufficiency. 52% of them are located in Casanare and 18% in La Guajira. If we add probable reserves (15%) and possible reserves (14%), we would have enough self-sufficiency for 11 years.

Ensuring the presence of gas in the Colombian energy basket is crucial. Conventional gas reserves have been declining at an accelerated rate (11 years in 2017, 8 in 2021). The world energy reality, especially the Russia-Ukraine conflict and its effects in Europe, force us to think about the permanent possibility of being self-sufficient or of having diverse sources of supply. Hence, it is necessary to adopt the firm decision to continue exploring our own basins, developing reserves as long as they are efficient and financially viable, and keep the possibility of importing gas when required by the domestic market.

In the last 5 years, the national transportation gas pipeline network grew by 304 km, amounting to a total of 7,762 km. Promigas contributed the most, with 200 km, 64% of the total stretch enabled during that period. The volume transported was 480 MMcfd in 2021, a 1% increase since 2017, despite the pandemic and the national strike. In terms of consumption, the industrial and commercial sector accounted for 32% in 2021, thermoelectric 22%, oil 20%, residential 18,% and NGV 7%. The industrial and commercial sector consumed 287 MMcfd, 11% higher in 2021 compared to 2020. Only the Pacific region failed to recover the consumption path it was on until 2019, before the pandemic.

As for Natural Gas Vehicle (NGV), there are 813 service stations in the country, currently serving 639,428 vehicles converted to NGV, which generated 36% average savings for users in 2021 compared to gasoline, and 17% compared to diesel, in addition to a 99% reduction in fine particulate material. Factory-designed natural gas vehicles are exempt from VAT and are not subject to license plate restrictions in any city in the country, and their taxes cannot exceed 1% of their commercial value. They are also exempt from emission certificates for 10 years and have a 30% discount on complete mechanical overhauls and 10% on SOAT (Compulsory Traffic Accident Insurance) premiums.

By law, 30% of new cargo vehicles must be dedicated NGV, and 300 tractor units have been sold per year in the last 5 years. OPL, Elogia, and Postobón were the largest fleets incorporated in 2021. Promigas, TG, Ecopetrol, Surtigas, Gases de Occidente, Vanti, Gases del Caribe, Efigas, Alcanos, and Llanogas structured a financing tool to grant credits to small independent truck drivers to upgrade their truck to a dedicated NGV. The first operations will take place in the fourth quarter of 2022. These vehicles stand out for their remarkable autonomy of up to 1,600 kilometers per tank, which is ideal for long-distance transportation.

"The efforts made in the last 5 years by the human talent in this industry has created opportunities for sustainable development in Colombia that the country is capable of exploiting. We are adamant that natural gas is key to overcoming energy poverty and continuing to bring well-being and progress to every corner of the country," said Juan Manuel Rojas, President of Promigas.

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