Rolando Balsamello – General Manager, Oiltanking, Argentina
Oiltanking’s Rolando Balsamello discusses the storage provider’s Argentinian operations, the evolution of the country’s oil and gas market, and the vital importance of stakeholder dialogue.
Globally, Oiltanking is the second largest independent storage provider for oil, gas, bulk chemical, fertilizer and petrochemical products with an overall storage capacity of 19.2 million cubic meters. How significant are your Argentinean operations in this context?
Most of our employees in Latin America have either started in Argentina or received training here and we are very proud of this fact!
Our Argentinean operations are generating the seventh most profit within our global operations. Moreover, Argentina has been the base to develop the rest of our Latin American operations; today, most of our employees in Latin America have either started in Argentina or received training here and we are very proud of this fact! We are naturally the largest operations in the region, however, we are seeing highly interesting developments in Peru and our Brazilian operations –initiated five years ago—are gaining in significance on a daily basis. In Argentina today, we can look back on a 22-year long history not only receiving crude oil from the Neuquén basin but also imports and crude from the south of the country via tankers. With our extensive distribution network, we serve five refineries in the country, three of them are 100 percent supplied by us and the other two in between 40 and 50 percent. This adds up to around 70 percent of the total refining capacity of Argentina.
Oiltanking in Argentina not only offers storage solutions, but also logistical services through Oiltanking Logística Argentina SA. What is the specific relevance of this subsidiary?
We had a separate business which was focused to develop services within other sectors and we had some success in developing pipelines for other companies, however, we had to close that branch for now. Nonetheless, we expect to reopen other successful positions in the near future!
You have been working for Oiltanking since 2003, how has the Argentinean oil and gas and energy market evolved in this time?
In the last ten to 15 years the situation in Argentina has been rather complicated because we started as an open business and the political and economic environment changed over time. Over the past decade the Argentinean government emphasized budgeting differently which allowed most companies in Argentina to survive. Today, however, I believe some of these measures should be reassessed and refocused in order to foster further private investment and allowing the business environment to evolve.
Oiltanking Ebytem is a strategic venture between Oiltanking (70 percent) and YPF (30 percent). How has this partnership changed over time?
In YPF we have found a very good partner. They are involved in the approval during the budgeting process and in decisions regarding new investments, in the rest we operate alone; after all, we are the experts in transport and storage. Overall we have a splendid relationship and this partnership will continue in the future. We are currently in the situation that we are reaching the limit of our capacity and the messages we perceive of our customers is clear: in the near future there will be higher demand in storage and transportation, hence why we need to invest strongly in the near future. However, we are yet to gain the right framework to take these investment decisions, for instance, the way the tariffs are managed is still a thorn for us.
Could you please elaborate on the challenge the tariffs pose?
The fees we are receiving today are quite ok for our current operations, however, as soon as we start to invest into new storage capacity the market prices for this capacity will be roughly 3.5 to four times above the actual fees in the system in which we operate. The challenge is to manage the investment with much higher tariffs compared to the situation we have today. We communicated this challenge to the relevant regulatory authorities warning them that we must expand the legal umbrella of our operations in order to be able to invest and enhance the services to our customers.
Do you feel these stakeholders are engaging in a dialogue with you?
The technical staff within the ministry of energy, for instance, has remained unchanged by the change in government and we have been in a dialogue with them for years and they are actively engaging in this dialogue. These people, however, are not the decision makers. Therefore, the right guys who have changed with the government have to listen to us and make a sustainable decision on how they want to manage a possible expansion.
Given that Argentina has bought 49 cargoes of LNG so far this year and plans to buy 90 in total, why does Oiltanking not offer natural gas / LNG storage at its terminal?
Argentina is currently importing 30 percent of its LNG consumption and in dialogue with customers I have identified the possibility of the introduction of fast track operations for LNG. This would mean the expansion of pipelines and jetty’s alike in order to accommodate tankers for regasification in addition to LNG carriers supplying the gas. These developments have been pushed over the last five years, however the government has still not decided when, where and how to build this infrastructure. I am confident that in the future LNG infrastructure needs to be build and naturally we would like to partake in this development, however, nothing concrete has yet come. Even the customers I have spoken to still do not know how this will work within the system because the Argentinean energy market is not open. We still have different prices for local production, which leaves a lot of unanswered questions regarding this development.
At the Investment forum, Minister Aranguren said that Argentina will develop three opportunities simultaneously: its continental offshore shelf, Vaca Muerta and fully exploiting its conventional resources yet largely untapped. It is likely that the currently 10% of Argentina’s crude oil exports will rise in the short term future. To what extend is Oiltanking positioned towards these developments?
We are very well positioned in regards to the development of Vaca Muerta as we are geographically positioned at the exit door of the basin. The truth, however, is that if the boom of Vaca Muerta is coming we will have to strongly invest in order to not only handle the existing operations for the supply of refineries but also to increase our capacity to operate larger throughputs coming from Vaca Muerta. In recent years, we have witnessed the reduction of Neuquén’s total production by 30 percent; should the production rise to old levels again or even exceed them, we will likely have to start exporting from Neuquén which will put strong pressure on our operations, which can also be a tremendous opportunity for us!
Argentina is currently at the vanguard of change under the new leadership of President Mauricio Macri. How prepared is Oiltanking Argentina towards these changes?
We are looking to expand our operations in order to partake in importing finished products, chemicals and petrochemicals. Currently the vast majority of these products comes through the panama river and it has been challenging to open a facility there as the investment necessary would hardly break even. Over the last decade we have had 15 to 20 different projects in the pipeline all focused on opening a facility there, but none of these could succeed. Nonetheless, we are still pursuing this option and I am confident that within the next five years we will succeed!
Now that the political and economic environment changed, will that boost your expansion efforts?
We are always working hard to expand our business regardless of the political situation. Our strategy is growth and as company we decided that importing finished goods and chemicals in Argentina is where we want to establish ourselves. We have succeeded some projects in worse conditions and we are not getting tired of launching projects; we always pursue to have ten projects in the pipeline as our experience shows that then one at least will succeed.
Your slogan for your services is “Doing the uncommon uncommonly well”, given that the infrastructure at large, for instance, is yet to be fully developed, what does this slogan mean to you?
When you see a tank or pipelines you know that this is not the technology of a challenger. However, we know how these need to be treated, how technology helps us to take care of the integrity of the tank and pipeline in order to operate in a good manner, with standards held to utmost quality, without affecting the soil, the sea and the wider environment. It means that we have the know-how and support of our shareholders, which are different to most companies’ shareholders as ours are focused on long-term success rather than individual results of a single year.
How will you maintain your dominance of 70 percent processing of crude oil in the country?
This will be complex because Argentina is a relative unpredictable market and we cannot simply do what we would like to do. We need to struck the right balance: the authorities play a very significant role in Argentina and we need ensure that our investments have the return we need. Therefore, we will continue to display excellency in our services and commit to further investments in the near future in order to extend our concession!
You have been working for Oiltanking for 13 years now, what will the next 13 years bring?
I expect significant growth in the next five years! We have plans to expand our capacity by nearly 40 percent, we plan to renew our positioning towards our offshore business and some of our customers plan to expand their refining capacity which means we will need to invest likewise in order to expand accordingly. Luckily, we will be very busy in the future!