Argentina's YPF says needs billions to revive output
BUENOS AIRES |
BUENOS AIRES (Reuters) - Argentina's state-controlled energy company YPF will need to invest $7 billion a year to boost flagging natural gas and oil output by more than a quarter by 2017, the new chief executive said on Tuesday.
Center-left President Cristina Fernandez seized control of YPF (YPFD.BA)(YPF.N) from Repsol (REP.MC) in April, accusing the Spanish oil major of investing too little and making the country increasingly reliant on pricey imports.
Chief Executive Miguel Galuccio - a former executive at global oilfield services giant Schlumberger Ltd - said YPF's plans to reverse the nation's energy deficit would require an annual investment of $7.0 billion from 2013 through 2017.
Most of that would come from the company's own resources, he said as he outlined plans to reverse dwindling production at mature fields and start tapping the country's world-class Vaca Muerta shale resource.
"We need to be realistic. Although I'd like to be able to double the production of (natural) gas and fuel overnight, I'm not a magician. In this industry, every extra barrel requires investment, technology and above all, hard work," he said.
"YPF needs to recover its leadership and vision in the country," he said in a speech to launch the corporate plan, vowing to make the company "professional and competitive."
Galuccio said 1,000 wells would be drilled next year - a level not reached by the company since 1996 - as the company aims to push up annual energy production by 6 percent each year starting this year.
That would represent a 26 percent increase by 2017 to reach 216 million barrels of oil equivalent (boe).
YPF, which registered a net profit in 2011 of 5.3 billion pesos ($1.1 billion), did not give more details about how it would be able to meet the estimate of required investment.
"We're going to have to go out and look for partners. For that reason, we're designing business models that allow us to accommodate different types of partners," Galuccio said.
Soon before Fernandez announced the YPF takeover, Repsol said it would cost $25 billion a year to develop the world-class shale find that has drawn interest from international oil companies despite jitters about the investment climate.
Argentina remains shut out of global credit markets a decade after staging the biggest sovereign debt default in history. Analysts say that means YPF's chances of stepping up production and developing the Vaca Muerta shale resource may hinge on its success in luring deep-pocketed partners.
Tuesday's report said the exploitation of just 15 percent of the Vaca Muerta haul would cover the country's energy deficit, which forced the import of $9.3 billion in fuels last year.
Galuccio said two pilot studies would be carried out at the site next year to drill 132 shale oil wells and 14 natural gas wells with an estimated investment of $1.36 billion.
If the drills proved successful, YPF would aim to develop a "production cluster" on part of Vaca Muerta, which means Dead Cow in Spanish and lies in the Patagonian province of Neuquen.
"That could generate total production of 550 million boe. That's similar to YPF's total proven reserves," Galuccio said.
Hydrocarbons output has been in decline for years in Latin America's No. 3 economy at a time of strong demand. Crude production fell 5.9 percent and natural gas output slipped 3.4 percent last year as power demand rose 5.1 percent, according to data from the Argentine Institute of Petroleum and Gas.
YPF's proven reserves of crude and natural gas - which do not include the new shale finds - fell 15 percent and 31 percent, respectively, between 2007 and 2010.
(Additional reporting by Helen Popper and Alejandro Lifschitz; Writing by Helen Popper; Editing by Phil Berlowitz)
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