Oslo-based Interoil holds two hydrocarbon production and exploration licenses in Colombia and three recently acquired licenses in Argentina.

Given the increasing interest Argentina’s Vaca Muerta play is generating among international investors, Interoil’s foray into Argentina may seem surprising: the company decided to enter the Golfo San Jorge and Noroeste basins, but not Vaca Muerta.

In the first of a two-part interview, CEO Leandro Carbone spoke with BNamericas about the decision and the company’s future, among other matters.

BNamericas: What are the key factors Interoil considers when deciding to add acreage to its portfolio?

Carbone: First, we evaluate the geology for hydrocarbon potential aiming at understanding the risk. Then we analyze the most convenient way to monetize any potential hydrocarbon accumulation in a reasonable timeframe. Finally, we carefully study and optimize operating vs. capital expenditures by applying new technologies that would lead to an increase in ultimate reserves recovery and improve netback selling prices, key factors when it comes to adding value to our portfolio.

BNamericas: Why did you decide on entering Argentina, compared to other countries in the region?

Carbone: Interoil has been mainly focusing its E&P activity on Latin America. Argentina’s energy sector is one of the most diversified and well-developed markets in Latin America. There are still underdeveloped oil and gas fields located in areas with open access infrastructure, world class technical professionals, established gas intensive industries [i.e. petrochemicals, fertilizers, aluminum, etc.] plus gas-driven thermal power generation units.

All these key factors position Argentina as an attractive long-term energy market with stable prices, providing solid ground for any E&P company. The knowledge and experience of the current board and management team in that market constitutes another important reason for the move, as it contributes to provide Interoil with the required awareness of the institutional, regulatory and commercial environment. This enables the company to gain swift access to, and to position the firm adequately in, the marketplace.

BNamericas: Out of your existing acreage, where do you see the biggest short-term and long-term promise?

Carbone: Interoil’s current acreage, in both Argentina and Colombia, is located in proven and prolific hydrocarbon basins. Our existing investment program is aimed at increasing the production rate from the producing assets and drilling exploration wells to untap the hydrocarbon potential of our exploration blocks. We’re very optimistic that we’ll significantly improve our production rates in both Argentina and Colombia in the coming months.

BNamericas: Why did the company choose to enter the Golfo San Jorge and Noroeste basins instead of the Neuquina basin and Vaca Muerta?

Carbone: Argentina has five well-known hydrocarbon-producing basins, where Neuquina, Golfo San Jorge and Noroeste are the ones with proven and widespread geological understanding. Interoil is actively evaluating opportunities in all of them and has decided to start its new Argentine operation by the acquisition of assets holding interesting conventional and unconventional potential. Nevertheless, Interoil is studying several opportunities around Latin America, including assets located in the Neuquina basin.

BNamericas: Do you see Vaca Muerta as potentially playing a role in Interoil’s portfolio down the line?

Carbone: Vaca Muerta will be part of Interoil’s focus in the short term. Our current acreage in Argentina includes two assets in Golfo San Jorge, where the unconventional play concept of the D-129 formation has already been proven by YPF and Pan American Energy and where production is already leading to commercial activity. The completion of this transaction indicates Interoil’s intention to become a key player in the unconventional game in Argentina. In that context, it’s natural to actively seek assets in Vaca Muerta with the view of incorporating them into our portfolio in the short term.

BNamericas: Do you see the upcoming Argentine presidential elections as potentially having an impact on your activities? Are you following the race closely?

Carbone: The oil and gas exploration and exploitation industry is key for Argentina, beyond and irrespective of a change in the national administration. The development of the Vaca Muerta concept began during the Kirchner years and has kept growing with the current administration. We’re confident any government will be keen to continue expanding E&P activity in Argentina for the benefit of local communities and the country as a whole.

BNamericas: What was your experience entering the Argentine market from scratch? Did you encounter any significant roadblocks?

Carbone: While Interoil is a newcomer to the Argentine market, this is not the case for the current directors and management team, who have extensive expertise and a successful track record doing business there. We’re already taking the necessary steps to reactivate production in the Mata Magallanes Oeste field, where we expect to stream the first barrel of oil by the end of the third quarter.

We’ve been negotiating and structuring what is needed in the field and on the commercial side based on the good networking and reliable track record that our management enjoys after decades of experience operating different oil and gas fields.

https://www.bnamericas.com/en/interviews/were-confident-any-government-will-be-keen-to-continue-expanding-ep-in-argentina