Monday, Oct 23, 2017
Energy | South America | Uruguay

ANCAP

‘We have no doubt that we are a good partner for investors’


11 months ago

Marta Jara, President of ANCAP
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Marta Jara

President of ANCAP

Uruguay's state-owned petroleum company ANCAP has carried out a major efficiency-oriented internal reform in its search for greater efficiency and is also continuing to develop alternative, more eco-friendly sources of energy. Furthermore, it continues to have the full backing of both the state and the people it strives to serve, as its President Marta Jara explains.

 

At a time when countries in the region are going through stressful situations, with Brazil in recession and Argentina in the process of economic and social restructuring, Uruguay is presented as a stable country with an institutional quality that goes beyond governing political parties, with clear rules and a robust legal system that guarantees impartiality and fairness, such as the Law on the Promotion and Protection of Investments, for everyone. What should Uruguay do to take advantage of this situation?

Uruguay is a small country but it is a country of very firm steps that punctuates its long-term vision. In our sector, that has been reflected very clearly in an energy diversification policy.

We are living in a volatile world; for example, if we look at oil prices, it is clear that all strategic decisions have to go beyond conjuncture and be structural and ensure continuity.

At the energy level, in Uruguay we work with renewable energy, natural gas, exploration and production of hydrocarbons. We want to put together a portfolio that is very robust thanks to diversification. These are businesses where decisions are not made based on a price or any exploratory success today, but whose decisions are linked to a long-term vision.

Uruguay offering full guarantees to the institutions is imperative. We have had success with Philip Morris recently, and although it has nothing to do with the energy sector, it demonstrates a consistency and an acute treatment of topics.

The oil and energy industry entails significant capital investment and very long repayment. The prevalence of institutions and the rule of law are crucial.

 

In that sense, and I quote here the Chancellor Nin Novoa: "Uruguay can not compete internationally regarding quantity and should focus on quality as a differential seal." How would you define the quality seal that Uruguay offers?

On energy, we speak of molecules that are "commodities". Differentiation does not come with the product quality but on its reliability.

There is a statewide support around particular projects that has translated into a qualitative difference for investors. We see it in large enterprises. In ANCAP it is seen especially in the exploration business.

There are agreements with front-line data acquisition service companies, which carry out multi-client studies for ANCAP, where they invest their risk. We have strategic business alliances through which these products are marketed and the world's largest oil companies have shown interest in Uruguay and have engaged in major exploration work.

Recently they managed to drill the deepest well in the world. Betting on border resources technically has a lot of challenges, and requires that any counterpart be given the institutional, regulatory and confidence conditions to make such as large economic and technological bets.

 

Within explorations being carried out with Total and Exxon Uruguay, what is the possibility of Uruguay becoming an oil-producing country and not an oil-importing country?

The economic impact on the trade balance and the economy in general that natural resources such as oil could have does not need much description, but we know that it is a high-risk and long-term business where we must continue on a path that can be very long.

The important thing for us is that we can optimize all variables that are under our control, not just geology, but also include everything that happens above the ground. The logistical and institutional challenges to adapt the procedures of port customs and environmental property to the new industry have been very important and have gone well. That is a success in itself and is a possibility of growth as a country towards more complex, more sophisticated industries.

 

In that long-term work, the Uruguay Round 3 would be the next step to attracting international companies to invest in Uruguay in partnership with ANCAP. At what point is this round and how it works to promote it in international markets?

This is a long-winded way; we continue having partnerships and operating activities with the major oil companies. We are always signing new agreements and receiving interest on their part.

There are expectations for Round 3, and we are evaluating what the ideal time is. We all know that the oil industry is in a difficult time so you can agree to differ slightly on Round 3, but is something we are evaluating.

Moreover, at the institutional level, the executive is looking at options of institutional design. We do not have a hydrocarbon agency; ANCAP plays that role a little, but all that is under review. Just recently there was another meeting promoted by President Vasquez with other political parties and former presidents recognizing that it should be a state policy rather than a government because of the implications that a hydrocarbon discovery may have.

We will continue at our pace, reviewing strategic and tactical choices that have to do with the opportunities in the industry that are best for the country.

 

You became president in February 2016 with the aim of reformulating the management model at ANCAP. You talked about your management being based on efficiency and accountability. What are the management measures implemented so far in the search for greater efficiency?

ANCAP is adapting to new circumstances. The decisions made at a time of great prosperity may be different from those taken at a time of less acceleration of the economy.

We are putting a very clear focus on efficiency, sustainability, and I think we’re doing an exciting job that will take a while to be able to take shape in numbers, but we expect 2016 to show even more clearly that the financial trend is reversed in the company.

What is clear is that for Uruguayans, ANCAP is the most valuable company in the country not only for its turnover, but also because it is involved in society as an engine of growth. ANCAP has the support of all Uruguayans for it to remain state owned, as they have expressed in plebiscites, and has the support of the Uruguayan state, which continues to be an investment grade status.

We have no doubt that we are a good partner for investors not only because of the strength that the state gives but also for the work that has done for people such as in exploration and wind energy.

As in all organizations, there is room for improvement, but I think the management team that came to me is a professional and experienced team who are bringing a fresh vision. We will not reinvent the wheel, but we do want to implement best practices in this organization with our full commitment.

 

Uruguay is betting on renewable energies and has reached the point where 57% of the energy is of hydro, wind, solar or biomass origin, relegating fuels derived from oil and gas to 43% of energy production. How are you aligning ANCAP with these trends?

We are at the service of society and work with UTE and the Ministry of Energy seeking to maximize the benefits to society.

We all know that in this business energy needs to be accessible regarding cost, reliable regarding availability and produce the lowest environmental footprint. Uruguay is very committed to that: we lead renewable energy, not only in the region but worldwide. Nevertheless, oil or liquid fuels remain vital for the convenience and cost.

One of the biggest bets of ANCAP in recent years has been on biofuels. We are looking into more sustainable products.

Also, we have made major investments regarding reducing sulphur in fuels and as a citizen of Montevideo I can say that it makes a difference in air quality since the desulfurization plant was installed.

All these investments do not have an economic repayment but have a social compensation and are very important.

 

You have worked in Argentina, the United Kingdom, Venezuela, Mexico. There has been much talk about the things that you gave up to return to ANCAP. Why did you take on this responsibility knowing that you would undoubtedly leave behind a slightly more comfortable position?

I love the challenge; I love the work. If you want to be in a public service, I think the way is leveraging its powers and trying to do what you are committed to well. If I have the desire to serve my country, the best way to do this is by giving my work.

I think this is the way we can have the greatest impact. When I received the invitation to come to ANCAP, I could not resist. I found it a challenge as a professional with the ability to have a big impact on my country.

I’m very happy. This is a big challenge that will only be successful to the extent that I accompany a lot of people. ANCAP has a very strong support of the executive, its various ministries, and in that sense we are achieving work together to strengthen this company that all Uruguayans want. 



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