Danny Massacese, Upstream Managing Director, Pan American Energy Group : Interview

Interview : Danny Massacese

How would you describe Argentina as an investment opportunity in the energy industry?

DANNY MASSACESE: There are opportunities present throughout Argentina’s energy sector, particularly in unconventional reservoirs such as Vaca Muerta. Further down the line there are promising investment opportunities in the electricity segment. For the gas market it will be important to expand and consolidate. At this point, the most important issue to overcome is the overall cost of doing business as it applies to the sector. This will require some time to ameliorate, although we have made steps forward in the last couple of years. The high costs can be divided into two main but equally important aspects. First is the labour cost, which will require a constant dialogue with the unions to make all parties understand the benefits of developing the energy industry in a responsible and sustainable manner for all stakeholders. The second part of the cost equation is related to logistics and infrastructure, which is more challenging. There is no doubt we must find a way to deal with the low degree of infrastructure development as an industry. That said, we have seen positive steps aimed at overcoming existing challenges that were discussed and presented in the Federal Energy Agreement, bringing both national and provincial governments to the table. We must achieve sustainability in an industry that has, in the last decade, suffered distortions.

What can be done to promote the contribution of renewable sources to the energy mix?

MASSACESE: The results on renewable energy tender rounds carried out by the government have been fantastic – almost overwhelming. There is clearly an appetite to invest in Argentina’s renewable energy segment. The country is quite particular in this sense because renewable energy is first of all widely available throughout its geography, with solar energy in the north and wind power in the south. The opportunity to invest in renewables is filling a gap in the market that in that past had not been promoted or developed and is now displacing other means of higher cost energy production. Argentina is a natural fit for much of the technology that has been developed to efficiently produce energy from renewable sources. Moving forward, the main obstacle involves consolidating a market for interested private players, although this is starting to become a reality. Another obstacle is to develop the infrastructure needed to transport the electricity produced by renewable energy sources in the north and the south, and connect it to the national electricity grid.

How would you characterise the capacity and capability of local suppliers and service providers?

MASSACESE: This depends on each vendor or service provider. There are some that must make the extra effort to meet international standards, but Argentina also has local oil and gas service providers that are able to compete with international players, which, in some cases, is not fully understood.

In this sense, even when we have not reached the full potential of the quantity and quality of those services provided in the European Emission Allowances market, after seeing the results on some of our own projects with local providers, it is clear that the level of competitiveness is improving in recent years and that they are approaching if not reaching international standards. This comes as a result of many years of practice and effort in boosting internal efficiencies. In addition, local owners have long-standing experience in dealing with local market and business conditions, and therefore have more profound knowledge on the local business case. Conversely, international companies must seek approval from their headquarters to invest in any given project, which can cause overall delays.