It is thanks to the constant hard work of our staff and in response to the trust deposited in us that we have pleasure in presenting the “2019 Management Report”, which illustrates the good results and achievements made by Promigas and its companies.
2019 witnessed a downturn in the world economy, due to reduced growth in both advanced and emerging economies. In fact, the United States economy recorded a downturn despite household consumption being the principal driving force.
Against this tense international background, the average exchange rate for the Colombian peso was COP 3,281 to the dollar, a devaluation of 11% with respect to the 2018 figure. 2019 was marked by uncertainty over the trade dispute between China and the United States, the downturn in the world economy, reduced investor appetite for risk, and the increase in demand for dollars as a safety net.
The efforts of sector agents and the national government in the last two decades are reflected in the dynamics of natural gas coverage figures: seven of every ten Colombians now enjoy the benefits of having access to this fuel.
Proven reserves currently stand at 3.8 Tpc with an R/P factor of 9.8 years, not counting new supply alternatives such as offshore deposits, non-conventional deposits or LNG imports. It is estimated that the Caribbean Sea blocks could hold between 7 and 30 Tpc of gas, with a further 5.9 Tpc in the Pacific Ocean.
To the above could be added a further figure of between 4 and 24 Tpc from non-conventional deposits in the Magdalena Medio and Catatumbo regions, if the respective authorizations are granted. An optimistic scenario could therefore arise, if offshore and onshore potential materializes, that would lead to a true leap forward in sector competitiveness.
Promigas has contributed by making the necessary investments in transportation infrastructure and increasing its ability to face up to new challenges and meet needs deriving from discoveries and production at new fields in the south of Colombia’s Caribbean region and from the decline in traditional fields.
In 2019, we transported 50% of Colombia’s natural gas through our gas pipeline network of more than 3,000 km. As part of our commitment to operation safety and continuity, our carriers achieved reliability figures of over 99.9%.
Also in 2019, we regasified a total of 5,837 MMSCFD at our LNG terminal in Cartagena, and since this enabled us to meet the needs of thermal generators on the Caribbean coast, it illustrates the fundamental backup we provide for the national electricity system. One important fact has been the arrival of a new partner for SPEC, namely Dutch firm Royal Vopak, whose LNG experience will allow us to progress our business plan and consolidate and extend SPEC operations toward new initiatives.
Similarly, we finetuned our operation in Peru in 2019 by consolidating our presence in the northern part of the country through a new gas distribution concession in Piura which will involve an investment of USD 230 million, has an initial commitment of 64,000 new users representing 250,000 beneficiaries, and will provide 33 MMSCFD to serve the industrial, commercial and VNG sectors. Together with our current operations and investments, this makes Promigas the leading company in Peru in the field of mass natural gas usage.
With the commissioning of the new Jobo -Cartagena gas pipeline and the corresponding compression stations, we finalized and commenced operations on the first stage of the project to expand our transportation capacity by 100 MMSCFD. This project sees Promigas anticipating the decline in the La Guajira fields through new sources of gas from other fields in the southern part of the Caribbean region.
We would like to highlight the underwater directed horizontal drilling crossing of the Dique Canal and Correa channel, a major work in the hydrocarbons industry that was executed in 2019 using Colombian engineering as part of the 100 MMSCFD Project and is 3.4 km long and 112 meters deep, and involved an investment of COP 72,000 million. It is believed to be the longest crossing in Latin America and the eighth longest in the world.
One feature of 2019 was that we consolidated our presence in Peru by inaugurating a new gas distribution concession in the Piura region, in the north of the country, which will involve investments totaling USD 230 million. The initial commitment is 64,000 new users, representing over 250,000 beneficiaries, and a volume of 33 MMSCFD to serve the industrial, commercial and VNG sectors. Together with our current operations and investments in the country, this makes Promigas the leading mass supplier of natural gas in Peru.
In line with our commitment to climate change and to reducing greenhouse gases, we foster the use of new sources of clean, less-contaminating energies.
We reiterate our commitment to the Global Compact initiative and its principles, which are enshrined in four major issues: human rights, anticorruption, labor standards, and environment. As far as this latter is concerned, we support the ‘Caring for Climate’ initiative by guiding our activities and processes towards mitigating the impacts and effects of climate change.
Over a period of twenty years working in the field of education, we have forged more than a hundred alliances with the public and private sectors, enabling us to reach 2,137 public schools in the country, 84% of them in Colombia’s Caribbean region and the remaining 16% in other parts of the country, 46% of the total in rural areas. The programs we have executed have enabled us to impact the skills of 21,866 teachers and managers and to influence the learning experience for 1,615,231 students. In addition to this is the influence we have achieved over public education policies in the region, such as by becoming directly involved in drawing up the Ten-Year Education Plan for Barranquilla. Through its knowledge management line, which is recognized and certified both nationally and internationally, the Foundation has made more than 70 publications available to the academic community.
As far as the regulatory framework for transportation is concerned, we continue to create opportunities for discussion and analysis and, after a four-year delay, we are waiting for CREG to issue the new transportation rate calculation methodology for the next five-year period. Similarly, we are also still waiting for CREG to issue a Resolution approving values relating to the as-new replacement cost and the cost of keeping in service certain assets belonging to Promigas and its companies.
Our distributors continue to become involved in other lines of business in order to increase the value offer to customers, examples including new solar energy projects and promoting the use of environment-friendly energies.
When Surtigas connected its user number 800,000 in the town of Mompox, it achieved a total coverage figure of 96% in Bolívar, Sucre and Córdoba provinces, where it carries out its operations.
In Peru, Quavii has reinforced its activities and met its commitment with the Peruvian Government to connect
87,000 users by the end of the year. We would like to highlight the 2019 Business Creativity Prize, one of the most prestigious in the country, which was awarded by the Peruvian University of Applied Sciences for the operation of the LNG virtual gas pipeline to provide for the mass use of natural gas in the north of Peru.
In terms of electricity distribution, CEO consolidated the solar energy business and carried out the first coverage expansion project in Colombia, with smart measurement and a user prepayment service. It was recognized for this by the Superintendency of Domestic Public Services for Best User Service Practices in the Strategy for Fostering Citizen Participation category.
Transmetano, meanwhile, has continued to contribute to progress in Antioquia by leading activities and alliances with public and private institutions for developing the natural gas market in the region and converting major industries and vehicles to natural gas.
Promisol, with its 355 km network, has advanced towards its goal of consolidating its construction business by leading the Dique Canal underwater crossing project.
SPEC LNG, the LNG import and regasification terminal, has ratified its high operation and maintenance quality standards by achieving positive results in the worldwide evaluation of major LNG, that is carried out by terminals where operations are planned.
Our successful arrival on international markets and the major uptake of the bonds we issued have been a significant landmark in the company’s 45 years of history and, since these open the door to a new chapter of financing strategies, they encourage us to have an even greater presence on those markets, especially if we consider future growth in our current operations in Peru and the projected expansion of the company in the medium term. Our
USD 400 million bond issue was oversubscribed 6.5 times, with a 3.75% coupon, the lowest for a corporate issuer.
We have retained our AAA rating for issues in Colombia and our BBB- international rating, and we obtained a second international investment-grade rating (Baa3) from Moody’s. Our affiliates GdO and Surtigas also had their AAA ratings ratified, and Promioriente retained its AA+ rating from Fitch Ratings.
We continue to explore markets and to look for opportunities to invest, so that we can expand our current business or undertake new business ventures both in Colombia and elsewhere, enshrined at all times in sustainability principles and with the goal of generating greater benefits for our interest groups.