with Roberto Ramallo, Executive Manager, Pluspetrol
Pluspetrol in Peru represents a new generation of energy companies that have an unyielding integrated approach to the most complex and adverse operations. In this sense how do you strike the right balance between the financial and operational risks with productivity and results?
As a purely Argentine company in the early 1990s, Pluspetrol realized that we must look outside our national borders if we wanted to continue growing. From that moment the company began considering two regions of the world as possible expansion markets: Latin America and North Africa. These markets were chosen based on the amount of capital that was needed to enter and the risks that they represented for a young medium-sized E&P company as was Pluspetrol at that time. We were not ready to break into major markets such as the Middle East that were reserved for the major oil companies. By default we had to focus on locations and markets that were not of interest to the major companies.
We arrived in Peru in 1996 when PetroPeru was undergoing a privatization process and selling part of its assets, of which we successfully were awarded of Block 8. This was a major event in the history of Pluspetrol; first, because these were the first large operation of the company outside of Argentina, and second, because with it we were able to almost double the production we had in Argentina. Pluspetrol was fortunate to have previous experience operating in remote areas back in Argentina, such as the Ramos field , and therefore we had the technology and expertise to operate in similar conditions here in Peru. Due to this, we were confident that we could handle the environmental and logistical challenges that came with operating in Bock 8.
What is the importance and contribution of Pluspetrol Peru to the group as a whole today?
Peru today represents the largest hydrocarbon production that Pluspetrol has anywhere in the world and also the largest reserves of the company.
In Peru, we don’t see many major international Oil & Gas companies. What has been the key to success for Pluspetrol and what is driving the company’s growth?
Our first advantage is that we understand how to do business in Latin America. The founder of Pluspetrol always used to say that the oil business is a very long-term business and therefore one that has to transcend political trends and fluctuations. Presidential terms only last 4 or 5 years and therefore we have to envision that our projects will live through 5 different administrations and adjust our business according to that. As a company we have been very successful in doing this despite the political climate
What has been the role of partnerships in this success?
Companies look for us precisely because of the advantages I mentioned before. The foreign companies appreciate our sense of business and knowledge of operating in the Latin American environment, and on the technical side they also value our expertise of working in very remote areas under extremely harsh conditions.
It is essential to build a relationship with the local communities before initiating any project so that the success and safety of the operations are guaranteed from the outset. The problems is that local communities do not see much of the revenues of the oil & gas industry, because the royalties that are charged by the regional governments are spent on administrative expenses rather than on development projects that directly impact these communities. This is something that needs to be solved at the highest governmental level so that the system of royalties is reformed to include the local communities of the places where we operate.
Pluspetrol Peru, has played an instrumental role in fuelling not only the development and growth of Peru, but also of the entire region fostering growth and energy integration. Where can we expect to see the company’s future investments?
Regarding the upcoming bidding rounds to be launched by PeruPetro, we will have a look at the available options. We also have a lot of exploration projects to conclude on our current blocks and have already planned US$300 million only for Blocks 56 and 88
Out of your current assets where does the company foresee the most growth?
We have great expectations of Block 108, which is directly west of Camisea. We have plans to begin seismic projects by mid-2012. Block 108 is very promising and we expect very positive results in terms of the reserves that we find both for gas and oil.
Camisea could be compared to a “modern Machu Picchu”: a landmark project in Cusco that has repositioned Peru on the world map and has reshaped Peru’s energy matrix. While it is clear how instrumental this project has been for the country’s growth, what has it represented for the Pluspetrol and what have been the major changes the project went through?
Camisea represents for Pluspetrol the most challenging project to be accomplished by the company. Logistically, the project was truly a test because of the lack of roads and having to transport everything via rivers or airplanes. Just to give you an idea, to transport something from the port of Iquitos to Camisea can take anywhere between 21 and 28 days. The other catch is that the river is only navigable during a certain time of the year when it is the rainy season from November through March. Therefore planning the supply chain is critical for the success of the project Aside from the serious logistical challenges, there were also the numerous social issues involved in the completion of Camisea, but I must say that we were able to handle those very well.
Overall Camisea was learning experience for the company and we were able to get a lot out of it in terms of the lessons learned. We were also very fortunate to find the right people to make all of it happen on time and with the goals set in mind
While Camisea has been a success on many fronts, there is now an issue regarding the prices at which gas is being exported and those sold to the local market. What is the right balance between satisfying local demand and the export market?
The way to do this is to continue exploration activities in order to find additional reserves that will be destined specifically for the local market. Now the important thing is to find the resources that will continue supplying the growth of the local market.
15 years ago Pluspetrol was an early believer in Peru. Today Peru its communities and your partners believe in Pluspetrol. What is next for the company in Peru?
Our vision for future is to first continue the development of the Camisea gas field and to add new reserves to what already is there. This will be our focus in the near future. In the long-term we also have high expectations for heavy oil being explored by the subsidiary Pluspetrol Norte in Block 1AB
In the next 10 years I expect Pluspetrol to have developed Blocks 56 and 88, Block 108 next to Camisea and to have developed its heavy oil exploration in Block 1AB in the North.