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 cubic meters a day of
crude oil, down from 16,000 cubic meters a day 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 has been unable to detect precisely why some
wells are not producing optimally.
Pan America'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 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 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
(YPF.BA, YPF), partly in hopes that doing so would allow it to
raise national oil and gas production.
Pan American normally produces around 100,000 barrels a day of
oil and around 8.7 million cubic meters of gas a day 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 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 PLC (BP, BP.LN) owns a 60% stake in Pan American. The
remaining 40% is equally split between Argentina's Bridas Energy
Holdings Ltd. and China's Cnooc Ltd. (CEO, 0883.HK).
Write to Taos Turner at taos.turner@dowjones.com
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