- Argentina | 28 March 2017
Can you tell us about the importance of energy production for the Province of Neuquén and how it will affect development?
Neuquén has always been a significant energy-producing province, providing over half of Argentina’s energy supply, which is expected to increase as shale production expands. The province has abundant resources that should not be underestimated, as the subsurface contains resources 20 times greater than what has occurred in the past 100 years. Neuquén also has several hydroelectric plants near the two main rivers, the Limay and Neuquén. With the population expected to double in the next 10 years, the municipality where YPF began its first shale project in 2011, Añelo, could potentially increase up to 10 times and become the next Houston.
What actions have been carried out so far to attract investment in oil and gas?
In late 2007 and 2008, the former governor of Neuquén, Jorge Sapag, and his administration implemented policies to support the oil and gas industry. The government sought the renegotiation of existing contracts, expansion of platforms and exploration, as well as agreements with operators to extend their existing concessions. Additionally, Gas y Petroleo del Neuquén was created to manage bids, and the governor has had successful negotiations with companies like ExxonMobil to invite them to the province.
How can the infrastructure of the province cope with the growth in exploration and production activities?
Although the amendment of the Hydrocarbons Law of 2014 guarantees federal support for infrastructure development, Neuquén has taken matters into their own hands. The province has created three state companies to support specific types of infrastructure: the provincial Energy of Neuquén for electricity distribution, the Provincial Authority for Water and Sanitation for the treatment of water and waste, and the Provincial Department of Roads. These three companies will operate as tools for the province to develop the necessary infrastructure to support the exploration and production of hydrocarbons in Neuquén. The Council for Planning and Development Action (COPADE), in partnership with YPF Foundation, works with three local companies to analyze and know how to react depending on the impact of increased commercial activity. Funding for infrastructure and other projects will be provided from taxes, royalties, loans, and companies’ exploration and production, including OFS. However, the impact of industrial activity on surrounding communities requires much more than just basic infrastructure, such as building hospitals, schools, and other facilities.
How has Neuquén adapted its regulatory activities?
The Ministry of Energy of Neuquén is focused on optimizing the administration of regulatory agencies to increase exploration and production activity. The Ministry of Energy should be prepared to regulate the activity of oil and gas, both from a technical and environmental perspective. Regulatory bodies can learn from their American counterparts. Although there has already been oil and gas activity in Neuquén for over a hundred years, now it will be on a completely different scale. The Neuquén population must be convinced that the resources of the province are being exploited efficiently and environmentally safely, and companies must be convinced that the government will provide the vital elements for the industry’s development, such as infrastructure. For example, the Undersecretary of Mining and Hydrocarbons is developing a specialized oilfield services section.
Can you tell us about the reaction of the Neuquén population to the increased oil and gas activity in the region?
Well, some members of the population still haven’t fully grasped the impact that oil and gas activity will have on the region. However, I don’t anticipate a significant amount of social opposition to the development of both conventional and unconventional resources in Neuquén.
That’s interesting. What do you think the government’s role is in this situation?
The government’s challenge is to effectively communicate the opportunities and challenges involved in oil and gas development in Neuquén. It’s important for the government to do this in a clear and transparent manner, so that the population understands the benefits that can come from this activity.
Can you expand on what some of these benefits might be?
Sure, taxes and royalties from oil and gas activity contribute to 50% of the budget of Neuquén. This means that the region can invest in infrastructure, education, and healthcare, which will benefit the population as a whole. Additionally, the development of these resources can create job opportunities and stimulate economic growth.