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Argentina' s Pan American Energy says Cerro Dragon output below normal

BY TAOS TURNER

BUENOS AIRES--Pan American Energy, one of Argentina' s leading oil and gas producers, said it is trying to restore fallen oil output at its Cerro Dragon field in Chubut Province.

The company is currently producing 14,000 cmopd, down from 16,000 cmopd before hundreds of protesters stormed the field in June, destroying key equipment, fiber-optic networks, vehicles and other material critical to output.

The producer had initially thought it would be able to restore production to normal levels, but since the protesters left the field Pan American Energy has been unable to detect precisely why some wells are not producing optimally.

Pan America Energy' s spokesman detailed the problems in a radio interview tuesday and the company confirmed the situation on wednesday.

"We need to do a new seismic map to find out where we' re losing production, in which wells, and analyze the situation to figure out what the best strategy is for drilling in the future," a company official said wednesday.

Over the next six months, the company will reorganize or suspend work for 19 drilling crews while it studies how to return output to previous levels. This will affect work for contract employees working on those teams. Pan American Energy typically drills about 200 wells a year at Cerro Dragon, allowing the company to maintain or increase output while other oil producers in Argentina have seen production stagnate or decline.

Back in June, as many as 400 protesters took over the Cerro Dragon field and jeopardized the flow of oil and gas to untold numbers of Argentines. Provincial and federal law enforcement were virtually nowhere to be found and the protesters were able to destroy equipment in what company officials described as a military-style attack.

Pan American Energy' s spokesman Guillermo Baistrocchi said in the radio interview that the decision to reorganize drilling plans and suspend some drilling crews will "have an economic and financial impact" on the company. "This decision has been very difficult to make for a company that has always grown and we are aware of the impact it will have and we will use all means so that this impact is as minimal as possible," Mr. Baistrocchi said. The company plans to give an estimated 30 days of "vacation" time to the affected crew members.

The news comes just as Argentina' s government is struggling to boost declining oil and gas output nationwide in a bid to lower its dependence on expensive fuel imports. Earlier this year, the government took over the country' s largest oil and gas company YPF, partly in hopes that doing so would allow it to raise national oil and gas production. Pan American Energy normally produces around 100,000 bopd and around 8.7 mcmpd of gas at Cerro Dragon.

The Cerro Dragon field is more than 50 years old but it is still the most-productive and important field in Argentina. Pan American Energy has invested around $3.5 billion in the field over the past four years. Cerro Dragon is also one of the biggest fields of its kind in Argentina.

BP owns a 60% stake in Pan American Energy . The remaining 40% is equally split between Argentina' s Bridas Energy and China' s Cnooc.


Dow Jones Newswires

08/23/2012

 

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