International Finance Corp. (IFC) signed a $250 million loan for the Argentine unit of Pan American Energy LLC to finance drilling and waterflood projects in southern Argentina’s Golfo San Jorge basin.
The loan package involves a $115 million loan from IFC and a $135 million loan backed by commercial banks. The 7-year tenor of the IFC syndicated loan is the longest of any loan for an Argentina borrower since the country’s economic crisis in 2001, IFC said.
Pan American Energy accounts for 13% of Argentina’s oil and gas production. BP PLC holds 50% interest in Pan American Energy, and Argentine independent Bridas Corp. holds 40% interest (OGJ, Jan. 24, 2000, p. 19).
In 2004, Pan American Energy’s average production in Argentina was 212,000 boe/d, including 587 MMcfd of gas. The company also produces condensate.
During 2004-09, Pan American plans to increase its production at a compounded annual rate of 7% (9% for oil and 5% for gas) to reach 300 million boe/d, including 747 MMcfd of gas.
Drilling, waterfloods
Pan American Energy will use the loan for development and production of three key blocks-Cerro Dragon, Piedra Clavada, and Koluel Kaike-all in the Golfo San Jorge basin in the provinces of Chubut and Santa Cruz.
The project involves drilling gas and optimization of waterflood projects on the three blocks, with most of the money targeted for the Cerro Dragon block. The three blocks have 3,104 producing and injector wells.
The Cerro Dragon development program includes drilling 99 oil wells, 36 workovers, and the completion of six waterflood projects that were started in 2004. It also calls for the start of five new waterflood projects.
The Piedra Clavada and Koluel Kaike development program includes the drilling of 15 new oil wells and 10 workovers.
Pan American Energy plans to drill 45 gas wells.
Somit Varma, associate director of IFC’s oil, gas, mining, and chemicals department and manager of the oil and gas department, said it has been difficult for companies to raise long-term financing for upstream projects in Argentina for more than 4 years.
IFC’s rationale in investing there is that the country’s oil production is declining steadily, while it faces greater gas demand than it has gas production.
Varma said Pan American Energy is well known and has a system for hiring Argentine contractors and a domestically oriented purchasing system. ✦
