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Interview

Guillermo Juan Pereyra – National Senator, Neuquen Province; President, Mining, Energy & Fuels Commission (Senate Chamber); General Secretary, Rio Negro, Neuquén & La Pampa Oil & Gas Union, Argentina

The president of the Mining, Energy and Fuels commission in the Argentinian Senate, who is also the general secretary of the Rio Negro, Neuquén and La Pampa oil and gas union, reviews the development of Argentinian energy policies and explains his efforts to maintain strong energy legislation which ensures that both employee and corporate interests are secured equally.

Could you please outline your mandate as the president of the Mining, Energy and Fuel commission in the Argentinian senate?

The former government’s direction resulted in a significant energy deficit, a serious challenge recognized by the newly elected government hence why the new Ministry was created.

All proposed laws that are linked to energy, mining and fuel have to be analyzed and assessed by the Mining, Energy and Fuel commission of the senate, which has its counterpart within the chamber of deputies. Before proposed laws are reviewed by the commission, the assessors of the senate chamber review which of different stakeholders are affected which consequently are also invited alongside other key opinion leaders of the industry to reviewing process. This procedure ensures that the perspectives of all stakeholders are considered and that the consequent result of our work reflects an evaluation of all relevant concerns.

In case the chamber does not achieve a consensus, the president of the commission is responsible for deciding on the proposed law and making the final verdict. As president of the energy commission within the senate, I am in charge of managing the discussion and assessment process as well as determining the final decision regarding the mining, energy and fuel laws.

I am proud to hold this position within such a strategic commission, because it gives me the opportunity to listen to the different opinions of all stakeholders within the Argentinian energy industry, and allows me to improve the regulatory environment for all relevant stakeholders in the country!

One of the first things that President Macri did when he got elected last December 2015 was the creation of the Ministry of Energy, how has this affected the responsibilities and activities of the commission?

The former government’s direction resulted in a significant energy deficit, a serious challenge recognized by the newly elected government hence why the new Ministry was created. The industry was artificially sustained by public subsidies which had direct impact on the national public accounts; those subsidies were not incentivizing the industry to enhance efficiency. The current government is advancing towards minimizing such subsidies through strengthening the financial capacity of the energy industry by engaging in its own business activities and emphasizing the efforts to attract investments. In this regard, I totally agree with  the actions that have been undertaken by president Macri.

In reality, however, Argentina does not have enough financial capacity to explore and exploit the different existing basins in its territories; nevertheless, the national oil and gas exploration and exploitation activities need to be developed in order to achieve energy autonomy. It is worth mentioning that Argentina is currently importing around USD 8 billion of gas and—once energy autonomy is achieved—the financial commitment to imports could be distributed to other development areas of national interest.

It is well known that Argentina has enough energy resources to satisfy the national demand and will eventually bring back the country to its former export status, however, the challenge behind this potential is to attract the funds needed to allow its exploitation. The recent discoveries, such as Vaca Muerta, put Argentina in the center focus of many potential investments. Companies such as PAE have carried out several tight-gas drilling pilots in Lindero Atravesado basin already and the results were highly satisfactory, further providing evidence of Vaca Muerte’s great potential!

Considering the big challenges and the commission’s broad range of responsibilities, what are the main topics on your agenda?

We are currently working on the development of a project aimed to showcase the potential of the existing mature wells distributed across all of Argentina. It is a project that can have several positive impacts to the national energy industry, as there are more than 3,000 mature wells which are not being exploited to its full potential! The response of the industry has been quite positive so far. These mature wells were abandoned in Argentina as a consequence of its low production potential and its low profitability for the IOC’s. The law designs a plan to requiring these IOC’s, who are the owners of those mature wells, to share the production rights of those wells with small and medium size companies that will be able to enhance the production profitability due to their flexibility and their low structural costs.

Frankly speaking, those wells are already in prime condition as all the infrastructure needed for full exploitation is already established; they only require technology and flexibility from the SME’s to re-activate its operations. The latter is especially true in the context that Argentina currently has a set national oil price, although the sustainability of this energy policy once commencing 2017 is highly questionable. This statement poses a challenge to the ratification of this law, nonetheless, these SME companies would be able to develop the production activities in those mature wells and remain profitable. The idea for this law was derived as a reference of best practice used in the US and in Canada where a substantial number of mature wells are existing and equivalent laws have been able to take advantage of those mature wells, consequently allowing SME’s to carry out profitable operations.

In addition to being the president of the commission, you’re also the general secretary of one of the most important oil and gas unions in Argentina, what are the main topics concerning you in your role as a unionist?

The union elects its general secretary every four years, but I have been the general secretary of the Rio Negro, Neuquén and La Pampa oil and gas union for more than 32 years. As leader of this organization, I am highly focused on defending the interests and concerns of the industry employees across the three regions. My role is really delicate as a result of the current oil and gas industry environment where the companies are constantly considering redundancies as a consequence of the downturn of the global energy industry.

The union negotiates salaries and defends jobs if needed, however, we are also always considering the sustainability of the business community. In order to achieve such objectives, the industry at large is working towards the stability between companies and employees in an effort to improve the social and economic stability and to attract international and national investments. This path of development involves the entire oil and gas community: provincial and central government, unions, companies and employees. We are aware, that if we want to defend our jobs we have to take care of the companies as well fostering the attractiveness for investments.

Efficiency and productivity is a big topic within the oil and gas industry in Argentina. Considering the recent unconventional discoveries and the high costs of production, what is your perspective on the efficiency and productivity challenge in Argentina?

The union is aware of the international price situation and how it has affected the revenues and profits of the companies. We know that now productivity is a cornerstone for companies to survive. To achieve the former, they have to reduce their structural costs thus ensuring the profitability of the company as well as the existing jobs. In this regard, the union is fully open to discuss and debate this subject with the business community. Some of the collective agreements signed in the past were elaborated within a different scenario with international oil prices over USD 100 per barrel, hence why my union is open to discuss the adaptation of those agreements to the current scenario in order to ensure the sustainability of the companies as well as securing the interests of the employees.

The international perspective of Argentina has positively changed in the last few years as a consequence of the governmental change and the discovery of non-conventional basins. Given the current state of the country, to what extent is this international perspective reflecting Argentina’s reality?

We have been out of the financial capital markets for approximately 12 years, limiting Argentina’s potential. This is why the international relationships that we developed in the past were not the most appropriate for Argentina’s development. From my personal point of view, I am very optimistic about the economic development of the country and I think that the international relationships that president Macri is currently building up will accelerate Argentina’s development! Recent political actions have reinforced the potential of Argentina and—specifically in terms of the oil and gas industry—will enhance the attractiveness of our country towards international and national investments which will consequently develop the national energy industry to its fullest. Having said the former, there is still a long way to go and our ambitions will not be achieved easily.

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