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Interview

Ernesto Lopez Anadón – President, Instituto Argentino de Petróleo y Gas (IAPG), Argentina

Ernesto Lopez Anadón, president of IAPG, discusses the current energy situation in Argentina, the role of the institute as the technical reference for the industry, and collaboration among different energy stakeholders to increase the investment attractiveness of the country

Could you introduce yourself to our international readers and also give them an overview of the objectives and responsibilities of the Instituto Argentino de Petróleo y Gas (IAPG)?

Vaca Muerta is currently producing around four percent of the total oil production of Argentina; it is not a lot but will substantially increase in the future.

The institute was founded in 1957 as an initiative of YPF, Gas del Estado and other private oil and gas companies such as Panamerican, Schlumberger, and Shell. Since its creation the institute has been devoted to the technical support of the industry through activities like the organization of congresses, training courses (around 1,200 professionals are trained by IAPG annually), press interviews, and industry statistics.

Through our services, we cover the whole industry and lever our operations in 21 different commissions that represent all the oil and gas industry segments and operations both vertically and horizontally.

I am proud to say that IAPG is currently formed of more than 160 companies and approximately 800 personal members and is considered the technical reference for the oil and gas industry in Argentina. My main responsibility as the president of the institute is to ensure the quality of our services as well as preserve the essence of the institute.

IAPG is a comprehensive institute that embraces a lot of services. How does the institute leverage itself through these activities to promote the development of the national industry?

The institute is a non-profit organization and is self-financed through the annual membership fee and its own activities. Our operative model is based on the 21 commissions composed of 350 professionals and technicians of the industry working in different technical aspects of oil and gas and best practice identification.

How would you describe the contribution of the companies and personal members and the collaboration between them regarding IAPG’s activities?

The commissions are formed of personnel of the associated companies and personal members. Apart from the technical work they also collaborate in the organization of congresses. In addition, these commissions interact with the energy regulators of the industry when requested to do so.

IAPG is the technical reference for the Argentinian oil and gas industry. Does the association have any projects in its pipeline for promoting the development of the oil and gas industry in Argentina in the near to mid-term?

We usually perform specific projects such as analysis of the natural gas transmission system development and the natural gas distribution network. In addition, we are also working towards the optimization of E&P costs through running studies in logistics efficiency improvement among others.

Argentina is a country with a great tradition in the exploitation of oil and gas fields, but the decline of conventional resources has turned the country from regional exporter of oil and gas to a net importer since 2011. However, new discoveries of unconventional resources in Argentina such as those in Vaca Muerta have brought new perspectives on the future energy framework of the country. What is your assessment on the potential of unconventional plays in Argentina?

Conventional resources are declining in Argentina and our energy demand is increasing. As a consequence, we have started to import energy, mainly natural gas, from other countries such as Bolivia and Chile.

Nevertheless, there have been some developments in unconventionals that may help Argentina to overcome its current energy crisis. In the mid-term, I think that all the development of unconventionals in Argentina will be focused on the Neuquen basin with the development of Vaca Muerta at the center of this development.

The results of Loma Campana’s development have been highly satisfactory and have proved that Vaca Muerta can produce oil and gas. However, the development of the basin is in the early stage and, currently, there are some pilot projects being carried out by international companies such as Shell, Chevron, Total, Madalena, and Dow Chemical. This will increase the know-how and will develop the technology needed to exploit the unconventional resources in Argentina. Vaca Muerta is currently producing around four percent of the total oil production of Argentina; it is not a lot but will substantially increase in the future.

The big challenge behind Vaca Muerta’s potential is the capacity to attract new investments in order to build the infrastructure needed to exploit the basin. In this regard, the country has carried out some political and economic actions that have improved the stability and the investment scenario of Argentina, however there is still a long way to go.

Argentina is currently artificially maintaining the price of oil, paying around USD 67.50 per barrel. The international price is under USD 50 per barrel, therefore this should be better for producers in Argentina but the national cost of production is substantially higher than other countries. How do you foresee the situation of Argentina evolving in terms of price and cost of production?

The cost of production in Argentina is higher than other countries as a result of the existing inefficiencies in many oil and gas segments. Central government, provinces, companies and unions are aware of this situation and they should collaborate with each other in order to negotiate and find a better solution.

The cost of oil and gas production in Vaca Muerta is higher than the existing cost in other countries, being even double that of the US. However, through the development of unconventional know-how and technology we believe that the industry will be able to align the cost of production in Vaca Muerta with the ones existing in other unconventional markets.

After the constitution modification in 1994, the provinces became the owners of the resources located in their lands. As Neuquén and other provinces are a key piece in the energy strategy of the country, what is your assessment of the interaction between the government and the provinces?

Since the election of president Macri in December 2015, the country has been highly proactive in building the relationship between all the different provincial governors and the executive power of Argentina.

In addition, energy provinces and government are aware of the importance of attracting investments in order to develop the basins and they are working towards improving the stability and attractiveness of the country. Political actions are already having impact on the industry and there are positive expectations about the entrance of future investments.

In terms of Neuquen, the interaction between the province and the government, especially with the ministry of energy, is really active and dynamic due to the huge potential of the unconventional resources in the Patagonian province.

IAPG also has a presence in Houston. What synergies do you find between the American oil and gas industry and the Argentinian one?

The energy industry in Argentina has around 108 years of history and there are some American energy companies that have being doing business in Argentina for more than 100. Thus, they have contributed to the development of the Argentinian energy industry since the beginning; indeed some of the founders of IAPG are American companies such as Exxon.

The energy industry in Argentina has had some direction changes according to the different governments but companies, international and local, have managed to adapt themselves to the dynamic energy scenario and run profitable operations.

Regarding your 21 commissions working towards enhancing the oil and gas industry, the energy potential in Vaca Muerta, and other challenges such as energy logistics, how do you foresee the role of the IAPG evolving in the upcoming years?

The activities and capabilities of IAPG will grow at the speed of the industry and will adapt its technical support regarding the industry’s needs such as technology development and best practices identification.

As a president of IAPG, I have to maintain the leading position of the institute in the new Argentinian oil and gas era that, in my opinion, will be more focused on unconventional and downstream areas.

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