Interview with the governor of Neuquén, Omar Gutiérrez

What is the current situation in Vaca Muerta like?
We have been working in a new stage of exploration and exploitation of Vaca Muerta since 2012. And Neuquén had to face the challenge of this unusual growth. The eyes of the country were here, as they had been in these last 4 years.
All the actors working together- government, companies, unions- have managed to show that the reservoir is competitive at a worldwide level and this has been shown in the costs reduction, efficiency improvement and productivity.
The technological improvements implemented have made it possible to speed up times and consolidate the basin productivity and efficiency. And this increased the percentage of horizontal wells from the 30% existing in 2015 to the 87% in 2019.
In 2015 the horizontal branches were 1,000m long whereas since 2018 the average length was of 2,000 m, with some wells of 2,500 and 3,000 long. After an analysis of the drilling times a learning curve could be registered, with a continuous reduction of the drilling times.
As for the number of daily fractures, it’s being sought to stabilize it in 6 daily fractures, reducing in this way the gap in relation to what happens in the United States (about 6 and 8 daily fractures). This goal was made significantly easier by the method of transport of fractures by boxes.
Currently, there are short-term issues to be solved which require a solution aligned with short, medium and long-term objectives so that Vaca Muerta can truly become a public policy. Clear rules to be kept over time are needed so as to develop Vaca Muerta’s potential: that is, fast investment, production and work generation, replacing the oil and gas imports and generating oil exports. We need fiscal, monetary, economic and anti-crisis credit stabilizers and this is what we are working on together with the national government.
What are the results achieved during 2019 like?
Up to now, 38 non-conventional concessions have been granted by which the companies have committed themselves to investing 8,465 million dollars to drill 572 wells during the pilot phase. For the massive development stage, the projected investments amount to 178 billion dollars to drill a total of 13,047 wells. These 38 concessions account for the 29 % of Vaca Muerta’s area that, in Neuquén, has 30,000 square kilometres.
About production, the latest data available shows that, in December, 160,445 Mbbl/d of oil were extracted, 2.92 % more than in November. This accounts for the 23.05 % increase compared to December 2018. During 2019, 52.5 millions of oil barrels were produced, which means a growth of 23.36 % against 2018. Oil extraction from unconventional reservoirs accounts for the 65 % of the total output of Neuquén.
As regards natural gas, in December 69.38 MMm3/d were produced which meant a growth of 2,32 % compared to December 2018 (+10.6 MMm3/d), and a 0.75 % compared to November 2019. Up to December 2019, 18,774.6 MMm3 of gas were accumulated and 27 % out of this volume corresponds to tight reservoirs and 43 % to shale reservoirs. As for the production of accumulated gas during 2018, the increase recorded is 10.69 %.
We have gone further into granting new licenses of Midstream with the aim of generating infrastructure to make it possible the transport of greater amounts of liquid and gaseous hydrocarbons extracted from the basin. Agreements signed with the company Southern Gas Transport (SGT) will allow the transport of Vaca Muerta’s output. The planned investments amount to 300 million dollars for the first stage.
What are the projections and expectations?
Vaca Muerta is the driving force of the country industrialization. By 2021-2023, 26 billion dollars will be generated if there is team work and there is not any contingency. But, to achieve this, it is necessary to ensure economic and legal stability as well as incentives and benefits that will allow this sector entrepreneurs to reach sufficient levels of competitiveness. But to this end, it is essential to reach agreements, consensus and consultations as a country and as a whole : that is, unions, entrepreneurs, the different dimensions of the national, provincial and local State and the institutions. So as to move on to action, we have to agree and discuss and consider what each one has to bring to the table to keep clear rules of the game.
We celebrate that the national government has heard the province claims and has taken measures. It has set a cap on withholdings of up to 12 %, anticipating a path of incremental withholdings. If we analyse the Five-Year Plan of provincial Development designed for the 2019-2023 period, there is an integral vision based on a modern State, the expansion of the economic matrix, the public-private articulation and on the constant search of territorial balance. Under this scenario, the private companies are involved in the economic development in an integral way, especially in the hydrocarbon area.
But I insist, what we need at the country level is that the public policies applied on both the energy and economic fields should take into account clear rules with a long-term view. It will allow, on the one hand, that the investments -both national and foreign- would come to develop their full potential and on the other hand, also develop commercial policies to help generate the necessary markets so that Vaca Muerta´s production will reach the world in a competitive way.
To do this, the government of the province of Neuquén will always go for a constructive dialogue with all the industry actors, bringing forward solutions and proposals that will allow us to assess the whole potential of our resources in a sustainable way.
What is the situation of the companies based in the province like?
In the last two years new players have entered the province: Equinor, Schlumberger, Geopark, Vista Oil&Gas, in addition to the international ones like Exxon, XTO, Shell, Chevron, Total, Wintershall and Petronas, complemented by the national companies like YPF, Tecpetrol, Pan American Energy, Pluspetrol and ConocoPhillips.
Through the creation of GyP, the government was able to transfer all the remaining areas that had been passed on to its control in 2006; GyP puts them into value and looks for partners willing to explore and eventually exploit these areas. In this way, we have managed to bring the world’s leading operators like ExxonMobil and Shell that although they already were in the basin as partners they didn’t operate and now they do as GyP partners: Equinor, ConocoPhillips associated with Wintershall Dea in one block and in another one with Wintershall Dea and GyP, among others like, Tecpetrol and Total.
Playing this essential role in the provincial development of the hydrocarbons, we expect that this will go on being an open door for companies to come and join Vaca Muerta’s development.
On the other hand, as for the companies that make up the hydrocarbon value chain, they have a great opportunity to continue expanding their capacity and diversifying their goods and services supply.
Currently, the local SME network has been affected by the impact of the latest measures applied to the sector, with far-reaching effects on the activity as a result of the withdrawal of the pieces of tower equipment and the operations related to well services (companies that provide hydraulic stimulation services, to give an example).
However, the local business network remains expectant and, in some cases, takes its time to check its processes internally and readjust itself to face the challenges posed by a strong reactivation of the activity.
Would it be possible to create, in Neuquén, a local production of parts and accessories to be applied to the sector?
The conditions are given and are suitable to develop the chain of local value of services and diversify the current supply of services to another one more focused on the supply of goods and inputs.
This productive diversification not only has the impact of generating labour supply that requires grater specialization but it also meets the challenge of producing a genuine technological development, and above all, opportunities concerning innovation. Besides, it provides stability to the natural variations of the activity and an excellent possibility of goods exports from the province to the country and the world as well.
In your opinion, what are the basic needs to be able to go on with the development of this sector?
Taking into account the impact of the latest measures on the local EMS network activity, we have understood that entrepreneurs need predictable scenarios that would make it possible for them to strategically design the development of their activities.
Local businessmen have large projects at their disposal to go on enhancing their productive supply and capacity. However, access to financing tools is essential to activate these initiatives.
The continuous strengthening of the internal processes of the companies is the way of going on with the improvement of their operations productivity and the quality of their products and services to be able to compete in a globalized market. This must be supported by training of their workforce and enhancement of the competitive conditions, so as to expand the personnel with direct or indirect participation in the development of the industrial activity in its different areas.
Actually, we have implemented the Ten Thousand Plan, which is an example of teamwork among government, unions, companies and universities, to train Neuquén youngsters for the industry and provide them with the knowledge and practical abilities.
On the other hand, so as to support and accompany this growth, the provincial government is working on social, logistics and transport infrastructure. We are carrying out a multiplicity of works aiming at promoting economic development, strengthening the investments development and integrating and bringing Neuquén people closer.
We give priority to the purchase and local labour force by providing more job opportunities for those who live here, generating an economic and social development circuit for the area. The goal is that everyone find in Vaca Muerta the opportunity to move forward.