Emblematic and almost 100 years old, YPF is a company that is emotionally close to Argentines. Its nationalization in 2012, after 13 years in which majority ownership was with the Spanish firm Repsol, made headlines in the world's daily newspapers, much more than did the low productivity it had suffered during the years it was controlled by the Spaniards. Its return to state control made chills ran down the spine of the local business establishment. But the results of those three years of work, after that controversial nationalization, are a 25 percent increase in gas production, petroleum production up by 10 percent, sales revenues higher by 29 percent (in dollars), with EBITDA of 43.4 percent, and an increase of 177 percent in upstream investments.
Latin Trade interviewed its CEO, Miguel Galuccio, at his Buenos Aires offices.
IN 2014, WHEN THE PRICE OF OIL FELL AND THE BALANCE SHEETS OF OIL COMPANIES DIPPED SOUTH, YPF INCREASED ITS PROFITS. HOW DID YOU MANAGE THAT?
We invested, and that investment showed results. Since 2011, production has grown by about 10 percent in oil and 25 percent in gas. This is because YPF was extremely efficient in what it did. We tried to achieve strong and sustained growth in production, and the good thing was that we were able to do it efficiently.
HAS INTERNAL CONSUMPTION INCREASED IN ARGENTINA?
The internal market has grown, and we have better prices than we had before, in addition to a business we didn't have before, which is gas. In 2011, just one well was drilled, which was done by Repsol. This year, we drilled 135 gas wells, in a country that was importing about 100 ships of LNG per year.
WHAT WAS THE COST?
We used to import gas at $15 per million BTUs, and the price of extracting new gas was fixed at $7.5 per million BTUs. In fact, the average price we got at the end of 2014 was $4.5 dollars per BTU. We have a margin of $2.5 in gas (NR: more expensive) relative to the U.S. market, which turned out to be a very profitable business in gas.
THE DARK SIDE OF SHALE TODAY IS THAT IT IS EXPENSIVE TO EXTRACT. HOW DID YOU LOWER THE COST PER WELL IN THE CASE OF THE VACA MUERTA FORMATION? (VACA MUERTA IS ONE OF THE LARGEST DEPOSITS OF UNCONVENTIONAL CRUDE OIL AND GAS IN THE WORLD.)
There's no magic formula for lowering cost. One part is know-how, which in the oil business world is exploration, delineation and looking for the most convenient development strategy. That know-how is developed through an understanding...