December 11, 2013
COUNCIL OF THE AMERICASFriday, August 23, 2013
YPF chief: we need more Chevrons
YPF CEO Miguel Galuccio’s second appearance at a Council of the Americas symposium was very much a comparison with his first last year when he sketched out his 100-day plan just three months after moving into the newly renationalized oil company. He expressed broad satisfaction with the results and restrained optimism over the shale potential of Neuquén’s Vaca Muerta fields.
“But we need more Chevrons,” he also said in a reference to this year’s 1.2-billion-dollar investment agreement with the United States oil giant.
Galuccio did not duck the “energy challenge” nor did he deny the fact of fuel imports but at no point did he share the picture given by many energy experts of supply and demand moving in opposite directions. In fact he said that fuel imports had “peaked” in 2012. Perhaps they have — until we see the figures at the end of this year.
At the start of a report lasting 53 minutes (when the symposium organizers had allotted him 15), the former Schlumberger executive summarized the past year’s achievements with four main figures — 140 percent more drilling, 94 percent more investment, three percent more oil and 4.2 percent more gas, reversing a persistent decline since 2009. YPF produces around half of Argentine oil and a quarter of the gas, he explained.
To underline the job creation from the first figure, he pointed out that each well drilled gave work to 50 people with perhaps sixfold that employment being created by services industries. If there was idle capacity when he took over from Spain’s Repsol, people now needed to be brought in from outside with everybody working at full stretch. In Vaca Muerta itself the teams had grown from four to 19 since last year — shale production there had risen 230 percent (he did not say from which base although he said that a potential of 50,000 barrels a day would double Neuquén’s current production). Galuccio also praised the “unique” YPF staff whose knowhow was ahead of the rest of Latin America.
Not only the quantity but also the quality of the investment had improved, he expanded. Some 80 percent of investment had come from cash flow with nine billion pesos in new debt also assumed — 53 percent of overall debt (whose dollar interest rates were 5.7 percent and peso 18.5 percent) was now in pesos with more rollovers. But Galuccio did not hide his appetite for international credit in conjunction with his quest for overseas partners, especially for shale — he pointed out how fracking has brought the US from being the world’s biggest importer to an exporter (especially LNG).
In the second half of his presentation Galuccio turned more political. He refuted environmental objections, saying that fracking 3-4,000 metres below the ground could not interfere with an aquifer 100 metres below the surface (residue a long way down the road would worry him more, he said). He also rubbished the argument that last year’s sovereignty had degenerated into this year’s Chevron agreement.
In conclusion, Galuccio said that YPF needed everybody — the rest of the industry, the trade unions and indeed the consumer at large for any energy they could save.