September 2019
What makes an attractive investment in Argentina currently? What type of portfolio, in either Oil & Gas or Energy, are you seeing that is offering sufficient upside/returns to justify investment?
Although Argentina, once again, is under the pressure of a financial and political turmoil, and has a repeated history of failures, I think there is an excessive negative market reaction due to wrongful expectations of default. I believe Argentina will offer attractive investment opportunities for those who are ready to stand the short-term volatility. As of today, Argentina is offering a cheap entry point in many sectors that have been heavily discounted, and as a consequence, this turmoil (that, in my opinion will only be temporary) will start to give rise to some unique investments, providing attractive long-term returns. In this sense, both the renewable and unconventional oil & gas sectors will position themselves among the most prominent for new players to step in and to seize projects that, at a low entry point, will allow to offset the current volatility and help achieve high yields.
Argentina currently faces a period of uncertainty, but the Vaca Muerta remains one of the fields with the highest reserve potential in the world. Would you advise companies and investors to invest in the long-term? Are you positive about the upside of VM investment? What do the long-term returns look like?
Definitely I would advise to invest. The potentially new administration of Alberto Fernández has highlighted the importance of the future large-scale development of Vaca Muerta. It is no secret that Vaca Muerta is a significant potential source of revenues for the country and a platform for large investments seeking attractive returns. In order to make this possible, the government will have to provide a clear framework suitable for the interests of the country but also for the investors, establishing clear rules that will allow investment projects to be properly executed.
The large companies, which own the core acreage of Vaca Muerta (67 per cent of Vaca Muerta is owned by just five companies), are only working on and starting to develop less than 10 per cent of their areas. Such companies should allow (and incentive) smaller companies to join them with investments and proactivity to develop the remaining 90 percent of Vaca Muerta´s areas that are not yet even part of their development plans. The production and capital spending of smaller independent oil and gas operators (local and international), would stimulate and imply a significant contribution to the Argentine economy (i.e. increasing labor incomes, exports, GDP, employment, national and governmental taxes, etc). We need to learn from the US successful experience.
I cannot assure how long-term returns will look like but, in my opinion, risk associated to unconventional production will (and should) be successfully compensated.
There is huge potential for Oil & Gas companies and Renewable Energy companies to collaborate in Argentina. How do you see this cooperation? Can you provide an example?
First of all, being these companies the ones who are better acquainted with the conditions of the country, they could help by showing their confidence in Argentina and be the first ones to continue with the execution of energy projects towards a matrix diversification. Secondly, through their expertise, knowledge and already established platforms, they could play an important role in helping attracting new players into the energy sector, promoting favourable interrelationships.
Argentina requires improvement to its transmission and grid infrastructure. How can it achieve this? Are PPPs the only way to finance them? If so, why? If not, what alternative options are available?
PPPs could eventually be a way to finance transmission and grid infrastructure, but only once Argentina gains access to the international markets again at reasonable rates – and we don´t know when that could happen, but we do already have the experience of the PPP for roadworks and we know that without tapping into the international markets, regrettably, PPPs fall short to provide a financing alternative. In the meantime, given the evident need for infrastructure improvements, typical investment projects should be promoted to execute these works, with reasonable compensations and, again, clear regulations for the one making these large investments.
Qualified suppliers/traders are a new and unestablished concept in Argentina. How can they help to resolve the issues that many companies are facing with regards to signing long-term PPA contracts?
Qualified suppliers in the renewable energy sector have already played a significant role in making access to financing easier. However, I believe the issues companies have faced when signing PPAs in Argentina have been more broad and complex than the qualified suppliers concepts. Said this, I do think it would be a helping tool for companies.
If you had a magic wand to change one thing about the energy industry in Argentina, what would it be?
I think that the new government should present to the country, considering all the stakeholders (communities, local governments, unions, citizens, investors, industry, etc), a long-term energy strategy in line with the structural changes that we are seeing across the globe (gas transition and a higher weight of renewables in the power matrix), offering a competitive and stable framework for investments.
Do you believe that it is harder to have a career in the energy sector as a woman? Why?
Definitely, it is harder. Until I became the vice-president of YPF, I thought that the difficulties for women to reach important leading positions in companies were a mere fabrication, something made up by them. But in the energy sector (mainly Oil & Gas), women have to do double efforts to be recognised. One example: the first time when I suggested to invest in renewables in YPF (2012), the largest Argentine company at that time only focused in Oil & Gas, to our board of management (6 men and myself), instead of giving arguments against my suggestions, they only said to me that I am ¨a typical romantic woman that should go to work for the green movement!¨ That wouldn't happen if the proposal would have been submitted by any of the men of that group.
What is the most game-changing practice you have come across or heard of that improved equality and diversity in the organisation?
We cannot afford to continue not having gender equality and diversity. Not only because of moral reasons, but also for business reasons, as we -women- are a key ingredient in challenging the productivity, talent, creativity and intelligence in the workforce. There is no one game changing practice to empower the women working at the industry. We need to have different initiatives, politicies, benefits and also professional development programs. It has to be focused by the top management of the business, who must realize the benefits of diversity and women empowerment. It is a proven fact that, by achieving this, the companies tend to be smarter and make better decisions.