TOGY talks to
Step into other marketsSeptember 18, 2017
Martín F. Brandi, the president of Petroquímica Comodoro Rivadavia (PCR), talks to TOGY about the challenges upstream operators face and potential investment areas. PCR holds several licences for fields in the Argentinian provinces of Mendoza, Neuquén, La Pampa and Chubut. In 2017, the company is carrying out drilling programmes across some of its assets. The company planned to drill 30 wells in Medanito, three in El Sosneado and 12 in Colhue Huapi. It possesses licences for two blocks in Ecuador and is looking to enter Colombia and Peru.
• On obstacles: “People think that all jobs must be provided by the oil companies and this has an extremely negative effect on operational costs. When conflicts require justice intervention, the sluggishness of the justice system is very costly for companies. Due to these kinds of issues since 2015, we have incurred large costs, which we might have otherwise devoted to productive investments.”
• On focus areas: “We are looking for projects in the hydrocarbons sector, mainly gas-related ones, which have a more stable cashflow than oil projects and are less volatile. We will focus on oil again once we have a more clear view of the evolution of oil prices. We don’t think that prices will significantly recover, but they may stabilise at around USD 55 per barrel. Those are sustainable prices that would allow us to have a viable business, though we would be much less profitable than when the price was USD 80 per barrel. We don’t foresee oil prices returning to those levels.”
Martín F. Brandi went in depth about the company’s upstream and oilfield services operations in Argentina, PCR’s recent entry in the local power generation sector and the potential the company sees in other South American markets.
Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can read an abridged version of the interview with Martín F. Brandi below.
What have been PCR’s main operational highlights in Argentina in 2017?
We will drill approximately 30 wells this year in the Medanito field. We are currently drilling approximately three wells per month. We had a one-month stop due to scheduled annual equipment maintenance, but besides that, everything is running smoothly in that field.
In the El Sosneado field, our plan is to drill three wells. That is a bit delayed, but will start in the last quarter of 2017.
In Colhue Huapi, we planned to drill 10 exploratory wells. Seven have been completed and we proved the commerciality of gas production. Additionally, we drilled two development wells, one of which has been completed and we were again able to prove the commerciality of gas production. This project was severely affected by adverse weather conditions. During the three months from April to June, we virtually could not work.
How significant are the agreements the oil industry has reached with labour unions in the Neuquén and San Jorge Gulf basins?
I believe they are going in the right direction, but insufficient. Labour productivity is not the only issue to improve. The community expects that oil companies shall solve their problems and provide extraordinary income to them. People think that all jobs must be provided by the oil companies, and this has an extremely negative effect on operational costs. When conflicts require justice intervention, the sluggishness of the justice system is very costly for companies.
Due to these kinds of issues since 2015, we have incurred large costs, which we might have otherwise devoted to productive investments. There is no understanding of the importance that these situations impact companies’ investment plans. For PCR, these expenses amounted to USD 4 million between 2016 and 2017.
We have seen certain improvements in the last few months that will certainly help the industry.
How is the Ecuadorian oil and gas industry developing?
In Ecuador, costs have adjusted reasonably well to the economic reality and the changes the industry has undergone since 2013. The situation at the national level is a bit more complicated because Ecuador has evident economic difficulties and PCR, therefore, doesn’t collect the contractual prices in full.
Those are the typical things that happen in a country whose economy depends deeply on an industry in distress. It seems that the new administration is trying to really solve the problems they have. There are some business opportunities in Ecuador that we are going to analyse.
How have PCR’s operations in Ecuador been affected by low oil prices?
The Palanda Yuca Sur contract expires in July 2019. If, before that date, the Oriente crude oil price reaches a value of about USD 48.90, this would trigger a seven-year extension and the obligation to drill two wells.
In Pindo, the extension was triggered in December 2016. We are drilling three wells. We should finish before by the end of October.
What opportunities does PCR see in Colombia?
We have had plans to operate in Colombia for a long time. The opportunity to participate in a block has emerged.
We have submitted a proposal to the authorities for the purchase of a 35% interest in a gasfield. We expect to obtain final consent by the end of 2017 or in the first two months of 2018. We have the technical and operational capability to manage this from our office in Quito. We will not participate as operators. It is a small block with very interesting reserves and exploration prospects.
We have always had an interest to grow in Latin America, but Colombia had always been a country with assets that were abnormally expensive. There have been some extremely successful ventures and Colombia values its assets as if every field would be equally successful, as if one was undoubtedly going to discover new reserves. Sometimes reserves are there and sometimes they are not.
Is PCR interested in expanding into any other South American markets?
Peru would be of interest, but with this oil price situation, we are going to be a bit more conservative until a more foreseeable scenario emerges with a barrel price of USD 50-60. We think that might happen. Now that we have lower prices, we will be a bit more prudent.
What would you like PCR to have accomplished by the end of 2018?
We are looking for projects in the hydrocarbons sector, mainly gas-related ones, which have a more stable cashflow than oil projects and are less volatile. We will focus on our ventures in Chubut at Colhué Huapi, where the most appealing prospects are related with finding gas.
In Colombia, if the deal finally closes, what we are involved in is also gas related.
We will focus on oil again once we have a more clear view of the evolution of oil prices. We don’t think that prices will significantly recover, but they may stabilise at around USD 55 per barrel. Those are sustainable prices that would allow us to have a viable business, though we would be much less profitable than when the price was USD 80 per barrel. We don’t foresee oil prices returning to those levels.
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