Super El Niño 2026 Poses Threat to Colombia's Energy and Economy

Scientists predict that 2026 will bring a Super El Niño weather event causing severe damage, with rising temperatures and economically concerning droughts. This climate model is forecasted to particularly heavily impact Colombia, causing severe droughts that reduce water levels and significantly decrease hydroelectric power production. This will place considerable pressure on Colombia's thermal power plants, which are already constrained by natural gas shortages, while simultaneously straining the electrical grid.

The result is a surge in expensive natural gas imports, adding further pressure on the fragile economy and financial strain of Colombia. Colombia began importing natural gas in December 2016. Since then, the volume of liquefied natural gas (LNG) has skyrocketed, despite rising prices. For 2025, approximately 18% of Colombia's natural gas consumption came from imports. By 2026, this figure has rapidly increased at an alarming rate. While initial calculations projected about one-quarter of Colombia's natural gas would come from abroad, this amount has risen to over 32% and is expected to continue rising.

Impact on Prices and Inflation

As a result, natural gas prices across Colombia are soaring, with imported LNG being significantly more expensive than domestically produced dry gas. Between 2022 and 2024, prices have increased by 36%, and despite efforts to mitigate risks associated with increasing natural gas imports, they continue to rise. Industry analysts estimate natural gas prices in Colombia could increase by up to 25% in 2026, further impacting businesses and households as the cost of living crisis escalates.

This, in turn, will drive further increases in inflation rates, which have been high for many years. These developments are weighing heavily on an already fragile economy, financially vulnerable with a record-high budget deficit of 6.4% of gross domestic product (GDP) by the end of 2025. This figure is projected to rise to 6.6% in 2026, making Colombia's budget deficit the third largest in the world.

Expensive LNG imports are driving inflation higher, increasing business and household costs as this is essential commercial and residential fuel. According to government statistics agency DANE, Colombia's monthly inflation rate reached 0.47% in May 2026, equivalent to 5.84% on an annual basis. This is the highest rate since 2024, when inflation was still declining after reaching a record 12.36% in 2023, due to pandemic surplus stimulus and globally skyrocketing prices related to COVID-19 lockdowns.

Increasing Dependence on Imported Natural Gas

Colombia's growing dependence on imported natural gas stems from a significant decline in domestic production along with depleting reserves of this essential fossil fuel. In April 2026, Colombia pumped 694 million cubic feet of natural gas per day, down nearly 1% from the previous month and a alarming 15% from a year earlier. This figure is 36% lower than a decade ago, highlighting the severe economic decline of this fossil fuel since Colombia's self-sufficient days.

This decline is primarily due to lack of new discoveries and significant decreases in production from Colombia's Chuchupa and Ballena fields in the offshore La Guajira basin. Production from Chuchupa peaked in 2010, with over 90% of all recoverable hydrocarbons already extracted. This field will reach its economic limit by 2027, now accounting for just 1% of Colombia's total natural gas production. Ballena's production peaked in 2014, with production expected to continue until 2039, when analysts forecast economically extractable natural gas will be depleted.

Declining Reserves and Energy Policy

These factors are responsible for the production decline and the widening supply gap will be exacerbated if El Niño arrives in Colombia in the second half of 2026. Recent news shows that proven natural gas reserves have declined once again increasing risks for the economy heavily dependent on natural gas. According to Colombia's national hydrocarbon agency, the National Hydrocarbon Agency ANH, proven natural gas reserves at the end of 2025 decreased by 17% from the same period the previous year to 1,717 trillion cubic feet.

This is the lowest level in 18 years, with growing concerns that Colombia's proven natural gas reserves will continue to decline. President Gustavo Petro has implemented short-term energy policies focusing on significantly reducing Colombia's dependence on fossil fuels, which has been disastrous for the country's oil industry. Petro, Colombia's first left-wing president, who took office on August 7, 2026, has implemented a series of policies aimed at maximizing benefits from oil extraction while simultaneously reducing dependence on fossil fuels.

This includes banning new exploration and production contracts, heavily impacting drilling activities and foreign energy investment. This is the main reason for the lack of new oil discoveries in Colombia, where there hasn't been a world-class discovery since the 1990s. This continues to affect Colombia's hydrocarbon reserves. Petro's decisions to continuously increase taxes for energy companies and attempts to ban hydraulic fracturing, known as fracking, have contributed to worsening the downturn in Colombia's oil industry.

These policies, particularly frequent tax increases, have led many drilling companies operating in Colombia to significantly cut domestic spending. Some energy companies, like Exxon, have chosen to leave the country, seeing greater opportunities, security, and profitability from any investment in neighboring countries, such as Guyana. These developments are severely impacting Colombia's hydrocarbon production and reserves. The profound impact of Petro's regulatory and tax reforms on Colombia's oil industry is amplified by increasing instability and violence in rural areas where much energy activity is located.

Security and Future Outlook

Since taking office, Petro has seen illegal armed groups expand their operations, using his "total peace" policy as an opportunity to expand territory, recruit new members, and conduct activities. Colombia's security agencies estimate approximately 22,000 members of various illegal armed structures across the country. This figure is significantly higher than the 15,000 members reported in 2022 when Petro took office. This, along with increasing coca cultivation and cocaine production, is behind the surge in violence in many rural areas.

Colombia's increasing dependence on growing volumes of expensive imported natural gas creates significant risks for the fragile economy, already affected by structural issues and serious challenges. This not only drives inflation higher, forcing Colombia's central bank to keep interest rates high for longer periods, but also negatively impacts industry and agriculture, where natural gas is an important low-cost energy source. There is also a very real risk of sudden electricity supply disruptions, continuing to affect the economy.

By Matthew Smith for Oilprice.com