December 18, 2013
‘High costs hurt exploration’
Bulgheroni tones down Vaca Muerta expectations
One of the top local oil executives had a message yesterday about the much-heralded Vaca Muerta formation that has been touted as the answer to Argentina’s energy woes: not so fast.
In a sobering speech at the Argentina Oil & Gas Expo yesterday, Alejandro Bulgheroni, director at the oil firm Bridas, expressed doubts about the potential development of shale oil and gas in Argentina, saying costs of unconventional drilling remain too high to be profitable.
He also seemed to throw a thinly veiled barb at YPF. A day earlier, at the opening of the Oil & Gas Expo, YPF chief Miguel Galuccio had called on energy companies across the country to boost production in order to reverse declines in crude and natural gas production. But Bulgheroni criticized companies for failing to share data on drilling activity in the area — seemingly a criticism of YPF, which has the most experience in Vaca Muerta.
The message? We cannot be expected to boost production if YPF does not give us a helping hand.
“More than 90 wells have been drilled,” Bulgheroni said. “The information is scare and is not shared openly between different operators.”
And the outcome has not been necessarily positive.
“We can say that the results have not been at all satisfactory,” he added. “This little experience, the lack of technology in Argentine service companies and the high operative costs put into question the potential profitability of these projects.”
Bridas, a joint venture between the Bulgheroni brothers and China’s CNOOC, owns a 40 percent stake in Pan American Energy (PAE), which is the second-largest crude producer in the country. British energy company BP holds the remaining 60 percent stake in PAE.
Last week, Bridas said it would invest US$500 million in the BAADE energy bonds that the government launched as part of a broader tax amnesty.
While the announcement seemed to give new life to the energy bonds that pay a four percent annual coupon in dollars and had failed to garner much interest among investors, Bulgheroni made it clear yesterday all the money would not come at once. Bridas, he said, would wait until the right opportunities came along to invest.