Tuesday, October 14, 2008
Oil In the Provinces
The ambassadors of Kuwait, Algeria, Morocco, Lebanon, Palestine and the Arab League met last Friday with officials of the government of San Juan province to express their interest in investing in the province. Their primary interest was the oil business, but the Lebanese ambassador also stated that his country has large technically competent companies who would be interested in getting involved in the anticipated tunnel through the Andes to Chile, an important link in the so-called “Two Ocean Corridor” which will supposedly connect Atlantic ports with Chilean ports.
The ambassadors of Kuwait and Algeria expressed concrete interest in the petroleum industry by their respective state oil companies, KOC and Sonatrach. The Algerian ambassador, a very good guy I have met a couple of times, pointed out, in his excellent Spanish, that Sonatrach is one of the ten largest oil companies in the world, and has already invested $500 million in Peru. In my personal experience, Sonatrach is a pretty good company when you consider the enormous challenges they have had to overcome, ranging from French sabotage at the end of the revolution, to terrorism, to cultural challenges, to one of the harshest climates in the world.
The ambassador pointed out that in order to interest Sonatrach in specific projects, the province will have to present a portfolio (“well done”) to Sonatrach, with very clearly defined requirements. Setting up an attractive investment climate is not necessarily Argentina's strong point, but on the provincial level it may be easier to achieve than on the national level.
The ambassadors from the oil producing countries stated that they do not expect the global economic crisis to have much of an effect on their economies, because most of their income is from petroleum extraction, even moderate oil and gas price drops will not affect them substantially.
This story from San Juan is part of the trend of the provinces moving ahead in the oil business after being more or less liberated by the Kirchners. Provinces now compete for investment money, and they are getting more for themselves than they did under the old federal system. In this case the market works.
The ambassadors of Kuwait and Algeria expressed concrete interest in the petroleum industry by their respective state oil companies, KOC and Sonatrach. The Algerian ambassador, a very good guy I have met a couple of times, pointed out, in his excellent Spanish, that Sonatrach is one of the ten largest oil companies in the world, and has already invested $500 million in Peru. In my personal experience, Sonatrach is a pretty good company when you consider the enormous challenges they have had to overcome, ranging from French sabotage at the end of the revolution, to terrorism, to cultural challenges, to one of the harshest climates in the world.
The ambassador pointed out that in order to interest Sonatrach in specific projects, the province will have to present a portfolio (“well done”) to Sonatrach, with very clearly defined requirements. Setting up an attractive investment climate is not necessarily Argentina's strong point, but on the provincial level it may be easier to achieve than on the national level.
The ambassadors from the oil producing countries stated that they do not expect the global economic crisis to have much of an effect on their economies, because most of their income is from petroleum extraction, even moderate oil and gas price drops will not affect them substantially.
This story from San Juan is part of the trend of the provinces moving ahead in the oil business after being more or less liberated by the Kirchners. Provinces now compete for investment money, and they are getting more for themselves than they did under the old federal system. In this case the market works.
