Repsol’s share in YPFB Andina is 48.33%
Exploration investment set to total USD 350 million
Development investment will total USD 500 million
Integration and innovationJanuary 11, 2017
TOGY talks to Diego Díaz, business unit director for Repsol’s Bolivia operations, about the benefits of strategic alliances, the importance of Bolivia for Repsol’s global portfolio, and the country’s key role in the regional energy economy.
Could you give us a brief overview of Repsol’s role in Bolivia, particularly in the country’s efforts to stimulate the growth of the energy industry?
Repsol has a very important role in Bolivia. The company has been mainly focused on gas exploration and production. Our E&P division has three main components. Firstly, the Caipipendi block where the Margarita-Huacaya field is. It has recently reached record production volumes: more than 19 mcm (670.9 mcf) per day. It is the most productive field in the country, accounting for a third of the national production. We lead a consortium that includes Pan American and Shell.
Secondly, we are unique because we have a strategic alliance with the state through YPFB Andina, the main hydrocarbons company in the country. Repsol has a participation of 48.33% [in YPFB Andina]. We are very happy with this.
Thirdly, we also operate in smaller fields for liquid fuels. There has been a great effort to improve efficiency and production in these areas in a sustainable manner. These are our main components. We have a great impact on the sector. We are making great efforts to encourage the growth of all these sectors.
In terms of the Caipipendi block, we are investing strongly in exploration. We have just signed an agreement with the government in order to invest USD 350 million in exploration and USD 500 million in developments based on the new incentives law for hydrocarbons. Together with our partners, we are committed to these significant investments, intended to tackle a very ambitious exploration plan. It will be mainly centred on two prospects: Boyuy in the southern part of the block (Tarija) and Boicobo Sur in the northern part of the block in Chuquisaca department. It is a difficult environment but we think we can contribute in this area. Thanks to a good predisposition from the state and the block’s potential, there is a positive attitude to carrying out this ambitious plan.
For YPFB Andina, we have a great portfolio of opportunities in exploration aside from the production that we manage. We will do seismic in certain blocks (Carohuaicho 8C and Oriental), exploratory wells in Río Grande Profundo and developments in Boquerón Norte. We have discovered the Boquerón field, which is now moving into the development phase.
What are the main operational risks and opportunities an operator faces in Bolivia?
We are operating in a gas country. A lot of the potential is in fields that are found in the sub-Andean region of the country. The geological structure is very complex and the wells are very deep (more than 6,000 metres). They have to be able to resist high pressure (more than 10,000 PSI). These are challenges that we are used to at Repsol.
The companies that operate in these areas need to have financial strength, technology, safety and environmental protection standards. Many of the areas in which we operate are very sensitive in terms of flora, fauna and communities. A lot of our efforts are directed towards operating without impacting the environment, [to] recuperating areas and respecting communities. It is crucial. We work in areas with indigenous communities, whether small or big, that need care. We also work in areas with farmers. It is important to make sure that our arrival brings a benefit to these areas.
How could infrastructure be optimised in the near future?
The country is moving in the right direction. However, there is still a lot to be done. Big investments have been announced in infrastructure, mainly in roads and railways. This will all be positive and continue the development of the sector. Until now, things have been moving well according to the limitations of the system. There are dirt roads that have allowed the development of huge fields in the south of the country. However, some extra development could accelerate things and improve efficiency.
Could you comment on the importance of developing strategic alliances in Bolivia, as you have done with companies such as Shell and Pan American?
Since 2006, the Bolivian hydrocarbons industry has been controlled by the state. Being able to co-ordinate with the state is fundamental for project efficiency and sustainability. It is very important to establish this relationship based on great results. We invest, we commit and we comply.
The Margarita-Huacaya field has been developed according to the initial development plans. We concluded the project before time, within budget and with production that exceeded the promised capacity. This feeds our relationship with the government, which is crucial if we are to continue developing projects.
Relationships with other companies are also very important. We have partners with whom we share risks and opportunities. It is a fundamental thing in an exploration portfolio. We also need to have technological collaboration. It is a way of sharing experiences and know-how. The synergies of the Caipipendi consortium assure us excellence.
In terms of the future of the company, what is Repsol’s role in relation to increasing the country’s gas reserves and production as one of the main objectives the current government has laid out for 2025?
Increasing production and reserves is a shared objective. In the short term, we have been working on eliminating bottlenecks in our plants in order to maximise the current production capacity. The well capacity of Margarita-Huacaya has exceeded the processing capacity. This is how we have grown from 14 million cubic metres [494.4 mcf] to 19 million cubic metres [670.9 mcf].
For the mid- and long term we are working on strengthening the country’s reserves and production through exploration projects, which take into account the volumes that the state needs to negotiate contracts with Brazil and expand its internal market. This is the country’s main objective. There is an ambitious plan in place which is based on maintaining and expanding internal consumption markets, exports to Brazil and Argentina, entering new markets and progressing in the industrialisation of gas to obtain extra added value. The base of this pyramid is the reserves, which depend on exploration. This is what we are working on. We hope to discover important volumes in Caipipendi. The fields are quite big in this area. We hope to find volumes of several tcf [trillion cubic feet]. We will be able to negotiate good terms in order to extend contracts.
What is Bolivia’s importance at a regional and global level?
Bolivia is a key country for Repsol. We have seen great results in the past years with a great impact for the country and for the company. It will always be a very important part of our strategy.
In terms of regional integration, Bolivia plays a key role. It provides gas for very important markets such as Argentina and Brazil. These countries will keep on demanding [Bolivian gas] in the future. There is an important equilibrium between exports and other necessities. It is a country with a lot of potential in terms of gas reserves.
Bolivia is very strategic for Repsol. The company is focused on three global regions. Bolivia is in the middle of one of the main regions, South America. Two-thirds of our production and three-quarters of our reserves are in gas. It prepares and helps us through this transition period.
There is also something about our technological capacities and strategic advantages. Specifically, we are experts in development and exploration especially for complex geological formations. There is a perfect strategic fit between Bolivia and Repsol. For the past year, we have been involved in an efficiency process. We dedicated ourselves to this after the commodity crisis. The results have been extraordinary. Repsol is leading this transformation. We can now be more efficient at lower costs. Our finances have been great these past months.
Bolivia has made great efforts to adapt to the new circumstances and it has found new ways of doing things. It has implemented new technologies, processes and business strategies. We are very well positioned here.
For the next four or five years, we are focused on exploration. This country needs early production in order to increase volumes. Our block is close to reaching its installed processing capacity. Bolivia has 100 mcf (2.83 mcm) of installed capacity. With a production of 60 mcf (1.69 mcm), there is a very good opportunity for using it. We have important projects close to plants with adequate capacity. It accelerates the availability of those new volumes and also the financial returns.
What is your long-term vision for the country?
Looking to the long term, our vision is to focus on sustainability in every single aspect of our activities as a company. We prioritise the development of local talent. More than 95% of our talent is from Bolivia. We promote teamwork. Development and constant improvement is part of our culture. We look at sustainability in our relationships with communities. We also look beyond our business activities. We try to bring immediate and long-term benefits to the areas we operate in. We finish projects before time and within budget.
Repsol is also a pioneer in taking care of the environment. There is a strong focus in reducing our carbon emissions. One-third of the country’s production comes from eight wells. So each one of these wells is very important. During the initial production, that gas is burnt. We have found a way not to do that. We are always a step ahead.