Colombia kick-starts lease auction but offtake questions persist

Late 2023 saw the Colombian government initiate an evaluation process that will result in the award of its first lease areas for offshore windfarms.

The process is said to have attracted interest from several well-known developers, but analysts warn the evaluation process will be lengthy and potential offtake options for power from Colombian offshore windfarms are unclear as yet.

As Offshore Wind Consultants (OWC) senior consultant Adriana Vargas-Colwill tells OWJ, late 2023 saw a flurry of activity as the Colombian authorities launched draft terms of reference (ToR) for the first competitive process to allocate seabed areas.

A centralised allocation system was adopted, co-ordinated by the National Hydrocarbons Agency, which allocates onshore and offshore lease areas in the offshore oil and gas sector, with a two-stage seabed leasing process. The first stage is a ‘Temporary Occupation Permit’ for a period of eight years, for development activity; the second a ‘Concession Contract’ that allows for a lease of up to 30 years, extendable by up to 15 additional years, for the operation of a project and its eventual decommissioning.

“In early December, the response to the public consultation on the draft ToR for offshore wind was released,” Ms Vargas-Colwill explains, after which developers submitted documentation in the first phase of the evaluation process. She says they had until late February 2024 to do so, after which, the evaluation process by the Colombian government will take place, culminating in December 2024. This means an announcement about which companies have won the country’s first round of seabed leasing is not now expected until late 2024 or early 2025.

As Ms Vargas-Colwill explains, the Colombian authorities have identified two areas for the country’s first offshore wind leases, off the coast of the departments of Atlántico, Bolívar, Magdalena and the north of Sucre, covering a total area of about 10,700 km2. “These areas are expected to be sufficient for up to 3 GW of offshore wind,” she tells OWJ.

A particular feature of the lease auction is that consortia are required to enter into a shareholding agreement with a Colombian state company. Ms Vargas-Colwill says a company has not been identified by the authorities, but state oil company Ecopetrol is expected to be first and foremost in the government’s mind. Ecopetrol is majority owned by the Republic of Colombia and is an integrated oil and gas company that carries out exploration, development and production of oil and gas. “The Colombian government is keen to ensure it retains experience in the development of offshore wind projects,” Ms Vargas-Colwill explains. “With its offshore expertise, Ecopetrol is an obvious partner for developers, but there are likely to be others, such as domestic energy and renewables companies who will be sought out by international developers.”

Ms Vargas-Colwill says Colombia’s experience of developing offshore oil and gas projects will stand it in good stead when it comes to developing offshore wind. It also has ports at which facilities to support the offshore wind sector could be developed. None of the leading owners and operators of installation vessels has experience of the Central American market, which could be challenging, but by far the biggest question mark about offshore wind in Colombia is what form of offtake mechanisms the Central American country will adopt. “There hasn’t been any clarity about this yet,” she tells OWJ. “It will undoubtedly come, in the later stages of the process, but how power from offshore wind will be brought to market isn’t clear yet.”