MACRI’S ARGENTINA: FROM PARIAH TO POSTER CHILD page 20 ENERGY INFRASTRUCTURE CONSTRUCTION: A HIGH-STAKES GAME page 25 EXCLUSIVE INTERVIEW WITH SENATOR GUILLERMO JUAN PEREYRA page 14 RED TAPE TO RED CARPET page 12 BACK IN VOGUE? PAGE 19 ARGENTINA JANUARY 2017 Acknowledgements Energy Boardroom would like to thank: Guillermo Juan Pereyra, National Senator, Neuquen Province; President, Mining, Energy & Fuels Commission (Senate Chamber); General Secretary, Rio Negro, Neuquén & La Pampa Oil & Gas Union Omar Gutierrez, Governor of Neuquén Richard Spies, CEO, Pan-American Energy (PAE) Adrian Mascheroni, General Manager, AESA Marcelo Carro, Commercial Manager, Rovella Caranza Adolfo Sanchez Zinny, CEO, Bolland ARGENTINA OIL & GAS A New Dawn Feature 12 CONTENTS January — 2017 2 ACKNOWLEDGEMENTS 5 PREFACE 6 SNAPSHOT IN FIGURES Balancing Jobs: Keeping the Plates 10 UNLOCKING UNCONVENTIONALS INTERVIEW Spinning Omar Gutierrez, Governor of Neuquén Province Exclusive Interview with Guillermo Juan 12 A NEW DAWN FEATURE Attracting the Global Elite Pereyra 14 14 BALANCING JOBS INTERVIEW Guillermo Juan Pereyra, National Senator, Neuquen Province; Mining, Energy & Fuels Commission (Senate Chamber); Rio Negro, Neuquén & La Pampa Oil & Gas Union 16 INVESTING IN ARGENTINA INTERVIEW Andrés Ondarra, Invest Argentina 19 BACK IN VOGUE? COVER STORY 20 From Pariah to Poster Child Back in Vogue? Cover Story 21 Putting Out the Welcome Mat 19 22 Neuquén’s Vaca Muerta: Valley of Dreams... 24 ...And Disillusionment 25 Energy Infrastructute Construction: a High-stakes Game 26 A Force to be Reckoned With 28 Closing the Cycle 29 A Formidable Heritage 29 Perils of the Pendulum Inside Oil&Gas is produced by Focus Reports Ltd. 32 THE VIEW FROM THE TOP INTERVIEW Richard Report Publisher: Diana Viola Spies, Pan American Energy (PAE) Project Director: Alina Manac Senior Editor: Louis Haynes 34 STRATEGY INTERVIEW Horaccio Turri, Pampa Energia Editor: Patrick Burton Editorial Coordinator: Jannes Peemoeller 36 ARGENTINA’S NEW POLITICAL DIRECTION Project Assistant: Claudia Prado, Luis Sancho FEATURE Open for Business Graphic Design: Miriam León For exclusive interviews and more info, please log onto 37 EPC INTERVIEW Adrian Mascheroni, AESA www.energyboardroom.com or write to [email protected]. 39 SOURCING SKILLS FEATURE Recruitment Copyright: All rights reserved. No part of this publication maybe reproduced in any form or by any means, whether electronic, mechanical or otherwise including photocopying, recording or any information storage or retrieval system without prior 40 SHAPING THE FUTURE INTERVIEW Javier Pastorino, written consent of Focus Reports. While every attempt is made to ensure the accuracy Siemens of the information contained in this report, neither Focus Reports nor the authors accept any liabilities forerrors and omissions. Opinions expressed in this report are not necessarily those of the authors. www.energyboardroom.com Argentina Oil & Gas 2017 3 STAY IN TOUCH: @energyboardroom www.energyboardroom.com JOIN THE CONVERSATION Argentina Additional full-feature interviews from our Argentina 2017 Report can be accessed on EnergyBoardroom, the premier website for C-Level executives, consultants and state actors in the oil and gas sector, alongside hundreds of exclusive interviews featuring the main movers and shakers of the industry, free country reports and sector insights supplemented by the latest news from global markets. AMPLIFIED CONTENT IN BRIEF @energyboardroom DIEGO SALENO – Director & CEO, Eduardo Montich of EMA Electro Mecanica on power IPE Neuquen, Argentina generation & distribution opportunities in #Argentina Read the interview @energyboardroom DIEGO FERNANDO JEREZ – Vice Liborio Flores Enriquez, Ambassador of #Bolivia to President, Huinoil, Argentina #Argentina, on their important bilateral relationship Read the interview @energyboardroom OSCAR LE CALVET – Director Carlos Koiffman Vinokur of Wood Group on the General, Contreras, Argentina strategic relevance of #Argentina to the group Read the interview @energyboardroom DIEGO CESAR BUNGE – President, Jose Luis Roces of @ITBA on the commodity price Argentine-Dutch Chamber of slump’s effect on #education & collabs with industry in Commerce, Argentina #Argentina Read the interview GUIDO BIZZOZERO – Senior @energyboardroom Analyst (Oil & Gas), Allaria Ledesma, Carlos Mundín of BTU explains what #Argentina offers Argentina investors & how to succeed in difficult times Read the interview 4 Argentina Oil & Gas 2017 www.energyboardroom.com PREFACE Preface With abundant natural resources, a cen- tury-long history of hydrocarbon extrac- tion, and the eighth largest land mass in the world, Argentina is truly an ener- gy giant. However, efforts by the pre- vious administration to ensure security of supply which involved nationalization of the country’s largest E&P actor, YPF, and expropriation of Repsol’s assets in Argentina, helped scare off international investors and led to the country being demoted from a net energy exporter to an importer in 2014. However, change is in the air. The go- vernment of new President Mauricio Macri has declared that Argentina is “open for business,” and the political winds seem to be flowing in the direction of greater international investment into Argentina’s oil and gas industry. With the third largest shale reserves of any coun- try in the world and a series of mega-play discoveries throughout the 2000s, now is the time for Argentina to leverage inter- national capital to exploit its undeniably massive potential. This report features interviews with key domestic industry figures as well as re- presentatives of major MNCs, who lay out the areas in which Argentina displays greatest promise. The road to regaining self-sufficiency and profit will not be smooth however; infrastructure issues, a lack of shale extraction expertise, and the prominent role of trade unions in the country are all obstacles that the cornu- copia of O&G actors in Argentina must overcome. If Argentina can do this, then the future looks bright. www.energyboardroom.com Argentina Oil & Gas 2017 5 SNAPSHOT IN FIGURES The Macroeconomy ARGENTINA FACTSHEET MACRI-ECONOMICS ARGENTINA % CHANGE ON A YEAR EARLIER Population: Area: 43,886,748 Consumer prices Macri becomes GDP 2,780,400 sq km president 60 6 FORECAST GDP (PPP): Capital City: USD 879.4 billion (2016) Buenos Aires 40 4 Currency: Official Language: 20 2 Argentine Peso Spanish 0 0 Source: CIA World Factbook ARGENTINA’S TOP TRADE PARTNERS -20 -2 TRADE BY COUNTRY, IN BILLIONS -40 -4 $29 (21%) 2014 2015 2016 2017 Source: Economist Intelligence Unit $22 (15.7%) ARGENTINA’S PUBLIC SECTOR DEFICIT $15 (11.2%) DEFICITS DURING THE FOURTH QUARTER OF EACH YEAR MILLION USD 2010 2011 2012 2013 2014 2015 0 $13 (9.5%) -1000 $3 (2.2%) -2000 $3 (2.0%) -3000 -4000 OTHER $52.8 (38.4) -5000 Imports Exports -6000 Source: World trade Organization, “Argentina: Merchandise Trade”, September 2015 Source: Secretary of the Treasury ARGENTINA’S GDP TRAJECTORY 8.9% 9.0% 10.4% 8.1% 6.1% 4.1% 2.3% 2.4% 0 -1.1% -6.0% -2.6% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2013 2012 Argentina is Latin-America’s 3rd largest economy in terms of Purchasing Power Parity. In 2015 its GDP reached USD 586 billion with GDP per capita at USD 13500 (USD 22,500 in PPP terms) In the last 10 years (2005-2015) Argentina’s compound annual gowth rate was 3.2% Source: INDEC 6 Argentina Oil & Gas 2017 www.energyboardroom.com SNAPSHOT IN FIGURES Argentina’s Energy Makeup ARGENTINA’S ENERGY MATRIX EVOLUTION ARGENTINA’S ENERGY TRADE BALANCE Exports-Imports Imports CIF Exports FOB (Cost Insurance & Freight) (Free on Board) 2015 2025 80,000 KTOE 100,000 KTOE 2003 -0.5 4.9 5.4 2004 -1.0 5.2 6.2 2005 -1.5 5.6 7.2 2006 -1.7 6.1 7.8 2007 -2.8 4.1 6.9 1.8% 1.9% 2.5% 5.6% 2008 -4.3 3.5 7.8 5.4% 4.8% 2009 6.6% 14.4% -2.6 3.8 6.5 32.6% 23.7% 2010 -4.8 1.8 6.5 51.1% 49.6% 2011 -9.8 -3.2 6.6 Coal Nuclear Hydro 2012 -9.1 -2.2 7.0 Renewables Oil Natural Gas 2013 -11.6 -6.0 5.6 KTOE: Kilotonne of Oil Equivalent 2014 -11.5 -6.5 5.0 Source: Ministerio de Enegía y Minería. Presidencia de la Nación. Source: Ministerio de Enegía y Minería. Presidencia de la Nación. PRIMARY ENERGY SUPPLY & DEMAND BALANCE Source: Ministerio de Enegía y Minería. Presidencia de la Nación. KTOE (Kilotonne of Oil Equivalent) 90,000 80,000 Domestic Supply Source: Secretary of the Treasury 70,000 Domestic Demand 60,000 50,000 40,000 16% 16% 15% 12% 11% 10% 11% 10% 30,000 9% % 7% 7% 7% 6% 6% 6% 7% 7 5% 5% 5% 2% 20,000 -3% -1% 10,000 -6% -7% EXPORTS IMPORTS - 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 www.energyboardroom.com Argentina Oil & Gas 2017 7 SNAPSHOT IN FIGURES International Comparison WORLD NATURAL GAS PRODUCTION TRAJECTORY BY TYPE (2010-2040) BILLION CUBIC FEET PER DAY Coalbed methane Tight Gas Other Non-Tight Gas Shale Gas 600 HISTORY PROJECTION 500 400 300 200 100 0 2010 2015 2020 2025 2030 2035 2040 Demand for natural gas, both shale and conventional, is projected to soar over the next couple of decades. Argentina, blessed with bountiful reserves, can be exrected to enjoy a windfall over this period. Source: EIA SHALE GAS AND OTHER NATURAL GAS GROSS PRODUCTION OF NATURAL GAS PRODUCTION IN SELECTED COUNTRIES MILLIONS OF CUBIC METRES/YEAR 2015 AND 2040. BILLION CUBIC FEET PER DAY. 45,524 Shale gas 44,353 Other gas 42,896 41,708 41,804 0 20 40 60 80 100 120 2015 2040 2003 2005 2007 2009 2011 Source: EIA Source: Ministerio de Enegía y Minería. Presidencia de la Nación.