Colombia’s state-owned energy giant, Ecopetrol S.A. EC, announced the discovery of a natural gas deposit in the Papayuela well. The well, located in Colombia’s Caribbean waters, has the potential to yield up to 800 million cubic feet of gas per day and meet 80% of the nation’s current demand, leading to an end of the energy crisis that the country is predicting in the years to come. The company informed that the project is in its early stages of development and could take five to seven years to become productive.

The Challenges Ahead for Ecopetrol

The Papayuela well is located in the Tayrona block, solely operated by Ecopetrol and the company foresees several challenges to bring the project to execution.

The announcement of the discovery came amid reports of the declining Colombian natural gas reserves, estimated at only 6.1 years of consumption.

Gustavo Petro, the President of Colombia, has strict environmental policies where fighting climate change is given top priority. The President has refused to grant new licenses for drilling projects even when facing concerns about declining reserves.

Additionally, another major project at the Sirius-2 well was halted by the court’s ruling due to concerns raised by local communities, creating further uncertainty in the nation’s gas production prospects.

EC’s Long-term Outlook

Ecopetrol, in partnership with midstream operator Promigas SA, has plans to convert the Central Oil Pipeline of Colombia into a gas transportation pipeline. The transformed pipeline can be viewed as a new substitute to supply the gas produced on the Caribbean coast to the interior of Colombia. It will also prove to be a strategic step toward the natural gas supply gap and energy shortfalls.

EC’s Zacks Rank and Key Picks

The Colombia-based petroleum company, Ecopetrol S.A., is focused on identifying opportunities within the eastern Llanos Basin of Colombia, as well as in other areas in Colombia and northern Peru. Currently, EC has a Zacks Rank #5 (Strong Sell).

Investors interested in the energy sector might look at some other stocks like Archrock AROC, PEDEVCO Corp. PED and Sasol SSL.While Archrock and PEDEVCO currently sport a Zacks Rank #1 (Strong Buy) each, SSL carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Headquartered in the United States, Archrock, Inc. is a provider of natural gas contract compression services as well as a supplier of aftermarket services of compression equipment. The Zacks Consensus Estimate for AROC's 2024 earnings indicates 50.72% year-over-year growth.

PEDEVCO Corp. is an oil and gas company, engaged in the acquisition and development of energy projects in the United States and Pacific Rim countries. Over the past 60 days, the Zacks Consensus Estimate for PED's 2024 earnings has improved by 60%.

SSL is engaged in the mining and processing of coal. It also produces chemicals, explores and refines crude oil and manufactures fertilizers and explosives. SSL’s expected EPS (earnings per share) growth rate for three to five years is currently 16%, which compares favorably with the industry's growth rate of 15.6%.

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