The bill of collection is the Government that is coming out, because no gas exploration license was handed over

Cerro Matoso, one of Colombia’s largest mining operations, has announced a reduction in its production capacity by half due to a lack of gas supply from Canacol Energy, according to Ricardo Gaviria, a representative of the company. The decision comes after Canacol unilaterally reduced the amount of gas being delivered to Cerro Matoso since early July, leaving the mine operating at just 50 percent capacity. This shortage has affected over 570 jobs and led to daily revenue losses estimated at around 1.5 billion Colombian pesos. The issue stems from a contractual agreement between Cerro Matoso and Canacol Energy, which was signed in 2022 and set to last until 2029. Under this agreement, Canacol committed to supplying 16,000 million British thermal units (MBTU) of gas per day to support Cerro Matoso's operations. However, starting earlier this year, Canacol began reducing deliveries, initially down to 11,000 MBTU before dropping further to 4,000 MBTU by mid-July. These reductions were made without prior consultation with Cerro Matoso, leading to operational disruptions and financial strain. Gaviria explained that the drop in gas supply forced Cerro Matoso to reduce its operations by 25 percent in early July, and the situation worsened to the point where a full halving of operations became necessary. The impact on production is significant, with annual output targets for 2026 set at 32,100 tons of ore. At current levels, the mine will likely produce only 26,000 tons, a decrease of nearly 20 percent. This reduction threatens the stability of the operation, particularly given the high fixed costs associated with maintaining the facility and the need to preserve certain production lines using electricity, despite the risk of damaging equipment not designed for such conditions. Canacol Energy has faced challenges in maintaining consistent gas delivery, reportedly due to issues with their wells. Despite these difficulties, Cerro Matoso emphasized that the abrupt and unilateral nature of the cuts has been unacceptable. While there are provisions in the contract for penalties in case of non-compliance, Gaviria stated that neither Cerro Matoso nor other stakeholders want to see Canacol cease operations entirely. Instead, the focus remains on ensuring that Canacol fulfills its contractual obligations to deliver the required gas supply. Efforts have been made to engage with Canacol representatives, including discussions initiated in early May following the company’s request to cancel contracts through Canadian courts. Although initial talks took place with senior executives, subsequent attempts to communicate have been unsuccessful. As a result, Cerro Matoso continues to push for resolution while managing the immediate consequences of the gas shortfall. The situation highlights the interdependence between energy suppliers and industrial operations in Colombia’s mining sector. Without a stable gas supply, companies like Cerro Matoso face severe operational and economic challenges. Meanwhile, Canacol Energy must address both technical and legal hurdles to restore normal operations and meet its commitments to clients. The outcome of ongoing negotiations and potential legal proceedings could determine whether the current disruption becomes a long-term problem for the region’s economy and workforce.