Ricardo Markous: “Latin America has world class energy resources as well as projects to advance in the energy transition”

Tecpetrol’s CEO participated in a panel focused on the Global Competitiveness of Latin American Upstream, with other executives from bp, Petrobras and Harbour Energy. They highlighted the opportunities the region presents, as well as the relevance of legal frames and long-term investment conditions.

“Latin America concentrates about 40% of the discoveries of oil & gas”, said Alejandra León, S&P Global Associate Director and moderator in the panel. “But on what grounds and how can the continent compete in the global energy sector?

Together with Ricardo Markous, the CEO of Tecpetrol, the Techint Group energy company, other panelist were Joelson Mendes, Chief Exploration and Production Officer at Petrobras, Angelica Ruiz, Senior Vice President Latin America for bp, and Gustavo Baquero, Executive Vice President at Harbour Energy.

“Tecpetrol is operating in several countries in the region”, explained Markous. “We have operations in Mexico, Colombia, Ecuador, Peru, Bolivia, and of course in Argentina, which has a huge potential in unconventional resources with Vaca Muerta, where there are proven reserves of oil and natural gas for more than 100 years. What distinguishes Vaca Muerta is the quality of the source rock, as well as the learnings the industry has gained, increasing efficiency. Currently, in oil we have better productivity levels than in the Permian basin, and in gas we have better productivity than Haynesville.”

Ruiz agreed that Latin America has valuable resources. “The question is how to take them, not only commercially, but also considering the energy transition. I think you have to address each country with a different strategy: Argentina is strong in gas, which other countries do not have. The key is to evaluate which are the best resources in each case, to make doing business easier, to embrace the transition, and to train the best human resources for the industry”.

Mendes added that in Brazil the energy matrix is very solid, “with an oil & gas portfolio and other hubs presenting new challenges and opportunities, such as pre-salt. We are applying new technology at our facilities that will help us reduce emissions, and have just created a new department to handle aspects of the energy transition.”

When asked by León about the conditions that they see as crucial for the industry to develop in the region, Baquero commented that in Harbour Energy they are buying assets, the most recent being the acquisition of Wintershall Dea’s upstream assets in Norway, Germany, Argentina and Egypt. “We are effectively investing and developing assets in Mexico and in Argentina. The challenges in these countries have to do with the stability and long-term scope of the contracts; when you make a multi-billion dollar investment, you need to be sure you have the right terms and that these will be respected over the years.” He pointed out the difference with Brazil, where even though the political situation is unstable, contracts are usually respected.

Agreeing with Baquero, Markous added that, “It is important to take into account that even though Argentina has undergone economic turmoil for the past few years, Vaca Muerta was developed and is a success. I believe this is due to a conviction shared by local energy players and the different political parties and institutions about the industry’s potential to play a key role in overcoming the country’s macro-economic difficulties, as it entails relevant potential cashflows. The projections we have are that in a few years the country could be producing 1.2-1.5 million oil barrels/day, 80% of which will be unconventional. We are exporting gas to Chile, we are in talks with Brazil, and we are reversing the gas pipeline from Bolivia to replace imports from that country.”

Another important issue discussed was the developments and opportunities regarding the Energy Transition. “The whole industry is looking to move ahead into new sources of energy, cleaner and with fewer emissions. What are you seeing in the region?” asked León.

“You have to achieve the right balance, looking at the whole picture in each country, because they are very different: aspects such as existing infrastructure, the energy matrix, the pace at which the energy transition is moving ahead, in order to take decisions about global investment”, said Ruiz. Baquero added that in the continent, in Oil & Gas there are high returns. However, when it comes to renewables, this is another story, mainly because of the lack of legal frameworks regulating large-scale investments (such as those for carbon capture and storage for instance), or the lack of incentives such as the IRA (Inflation Reduction Act) in the United States.

“We do not have very high emissions in the region compared with other countries, mainly in Vaca Muerta, where due to the technology in use, these are considerably lower than the world’s average”, explained Markous. “But nevertheless, most operators are seeking to lower emissions. For instance, Argentina has a relevant renewables program. As a Techint Group company, Tecpetrol is pursuing an ambitious program to reduce CO2 emissions from our industrial plants in several Latin American countries. We are also beginning to invest in lithium, particularly in Argentina, which is becoming an important player as regards this mineral, key for batteries and the EV market. With our Global Investment Fund, we are supporting start-ups developing initiatives and technologies for the energy transition.

Mendes expressed: “In Brazil, the risk is low and contracts are stable, enabling us to develop Oil & Gas projects there. The main issue is the rampant poverty and inequality throughout the country, which is something we need to pay attention to, as well as the environment.”

Importance of social license

Baquero indicated that “political risk varies throughout Latin American countries, and the landscape is constantly shifting. The country with the highest risk is Venezuela, whereas the most stable one is Brazil. I am still optimistic about the other countries.”

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