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2026.10.09 | TB | Energy | CGC: Argentina Energy Potential

原标题：Compañía General de Combustibles – Unlocking Argentina's Energy Potential

#energy

Third Bridge · 2026-10-09

Analyst-led • 29 Sep 2026

Fernando Distel (FD) Production & Operation Technology Lead at Registros Mineros Argentinos SA (ReMA SA)

Georgia Beattie (GB) — Third Bridge Sector Analyst

Agenda

Key Insights

Introduction

GB [00:00:02]: Welcome to today's Third Bridge Interview entitled Compañía General de Combustibles – Unlocking Argentina's Energy Potential. My name is Georgia Beattie, and I'm fortunate to be joined today by Fernando Distel, the former Operations and Production Engineer at CGC.

Fernando, before we start today's Interview, please state I agree or I disagree to the following statement: You understand the definition of material non-public information and agree not to disclose any such information, or any other information which is confidential, during this Interview.

FD [00:00:42]: Yes, I agree.

GB [00:00:44]: Perfect. Thanks, Fernando. If you would, could you please start with a brief introduction to your background and your time at CGC?

FD [00:00:55]: My name is Fernando Distel. I am petroleum engineering with almost 20 years working in Argentina oil and gas industry. I was working for seven years at CGC here in Argentina. At first, I was working in a field position base as a production engineering leader for field located in north part of Santa Cruz province. Then I was promoted to the headquarters to position, well, based MBA related with oil production regarding all the fields involved with the company.

Questions

00:01:52] Given your experience in the O&G [oil and gas] space, how do you think CGC's [Compañía General de Combustibles'] set-up and strategy have changed over the last 1-3 years?

FD [00:02:03]: Well, CGC was focusing on conventional assets. Well, they planned a strategy to improve the profit moving forward to a mixture within conventional and non-conventional assets.

GB [00:02:22]: Is that the major change you've seen more recently?

FD [00:02:28]: Yes. I think that this is the main one because they always was based on conventional and with lower profits and then they switch to non-conventional strategy in order to improve the incomes.

GB [00:02:51]: What does non-conventional mean?

FD [00:02:56]: The non-conventional means is related with some fracking activities looking for some oil reservoirs located in the core basin, so it is not an risk, permeable, so it's maybe like lutite or something like this is the generated rock, so you have to drill to this rock and then to frac it in order to produce it.

00:03:45] How would you assess CGC's non-conventional operations across Argentina's main producing basins, such as Austral or the Golfo San Jorge?

FD [00:03:59]: The Austral Basin, for this company, it was divided in two assets, the eastern and the western. The western is the one that has the highest productivity, the highest potential and where it is located, the non-conventional project called Palermo Aike, so they focus the effort on their budget to this western location in order to improve the portfolio and the income.

GB [00:04:48]: What about across the Neuquén or offshore Austral?

FD [00:04:57]: Well, they have none Austral offshore activities right now, and they didn't have at all. Well, the Golfo San Jorge is focused on conventional asset that was sold by Sinopec Argentina around five years ago in 2020. This field are focused in oil production with some sweet gas compared with the Austral assets that are mostly gas production with little oil production. Besides that, they show the Neuquén Basin in a project with a participation in a joint venture with YPF and CGC is a non-operator member in this non-conventional asset.

00:06:03] In terms of management for each of CGC's operating areas, is there different management for each one, or does the company have centralised management across the different basins?

FD [00:06:16]: I think that both. The headquarters have the highest direction, which is involved in all the projects, all the basins and whatever, and then each field has each… How do you say, a field manager like field director in order to be responsible for oil and gas production, OPEX and CAPEX budgets and investment, so this field director make the proposals to improve their own field and it needs some highest approval, but mostly the proposal comes from this director team.

GB [00:07:22]: Do you think this works well?

FD [00:07:26]: I think so because every field director knows his field as the first hand and well, I think that is the one who has the real knowledge of how the operation is. Besides that, the headquarters concentrate the advanced reservoir studies, so if you need to develop a new maybe water injection project or some San Jorge reservoir project or something like this or some new drilling campaign, it comes from headquarters. It depends on the topic that you are talking about.

00:08:47] How is capital allocated to CGC's basins and businesses, such as upstream and midstream?

FD [00:08:56]: Capital is allocated through some production strategies, and most of the projects are following or looking for the financial incomes besides the oil and gas production income, because every project needs to be successful in the financial way besides it is successful as oil and gas production. It makes sense when you analyse some problematic wells, some very technical difficult strategies that need a lot of budget, effort and then you realise that maybe you could have some oil and gas production, but with a lot of cost, highest cost, and this higher cost maybe is not the better decision to invest because in some cases, you could invest with a lower budget and having maybe lower productivity, but with highest income results.

GB [00:10:28]: Where do you think capital is being allocated at the moment?

FD [00:10:38]: This capital is allocated properly because they focus the strategy besides the different income projects.

GB [00:10:58]: In terms of specific basins or areas, where do you think the most capital is being allocated at the moment?

FD [00:11:09]: At the moment, the most capital is allocated in the Golfo San Jorge Basin. I think that there is almost maybe 50% of capital allocated there in this basin. The Austral one has maybe 30% from the whole company, capital allocated and around 20-25% is allocated in the joint venture with YPF in Neuquén Basin.

00:12:06] What is the natural annual decline rate across CGC's core conventional Austral wells?

FD [00:12:16]: The Austral wells usually have a productivity around how do you say, 20,000 cubic metres gas and around maybe 30… Well, in bars in barrels could be around 70 or 80 barrels per day oil barrels. No more than that. Remember that the Austral basin is gas basin. Most of the Austral wells produce gas with a little oil compared with the opposite situation in Golfo San Jorge, where the wells produce oil with little gas.

GB [00:13:25]: What decline rates are you expecting?

FD [00:13:31]: Decline rates, well, almost all the Argentinian wells declined very fast during the first two years. A new well, I think that assertionally situation declines around 20-40%, up to 50% during the first two years. Then during the first two years, this decline, and then after the third year, it shows a trend like a stabilise trend around maybe 5% per year, something like this up to no more than 6-7 years as a flowing well. Excuse me, the first two years, maybe as a flowing well and up to six and seven years as a primary oil production well. Then you have to decide if you switch to a secondary recovery or some enhanced oil recovery or something like this because you have to add some extra energy to reservoir in order to produce the oil production inside that you could not produce in a primary oil production situation.

GB [00:15:19]: Is that across all of CGC's wells, or just those in Austral?

FD [00:15:29]: This situation is mostly typical for Austral and Golfo San Jorge Basin, and then the Neuquén Basin as a non-conventional player, it declines a little bit faster.

GB [00:15:45]: How much faster?

FD [00:15:51]: Maybe they reach the 40-50% during the first year instead of the second year, something like this. It is a little bit faster, it depends strongly with the fracking activities, and then remember that the non-conventional wells in Neuquén Basin have a performance very similar with the American non-conventional maybe Eagle Ford or something like this, and then you have a flowing situation very short, maybe 1-1.5 years and no more than that, and then you have to switch to an artificial lifting system, maybe sucker rod pump or something like this in order to continue production.

00:16:58] Overall, the total wellhead production has dropped at CGC's Austral wells, as you've explained. What factors do you think have driven this? Do you think this will continue?

FD [00:17:13]: The Austral Basin has dropped its production. I think that you have to check where this asset was divided in the western asset, western half or Austral Basin is still held by CGC, but the eastern one was sold two years ago, something like this in order to switch to this joint venture in Neuquén, so if you compare the whole activity without taking note of this eastern side, maybe you could have a higher impact of this dropdown. Besides that they decide to switch some rig contracts with some rig companies in order to optimise cost. In this situation, they have at least 1.5 years, something like this, maybe two years with no drilling and workover activities, so it explains why they dropdown the activity and the productivity.

00:18:50] How would you characterise the state of CGC's surface processing and water treatment infrastructure?

FD [00:19:03]: Well, water treatment is very relevant in Golfo San Jorge Basin because take note that the water cut in Golfo San Jorge is around 97% up to depending on the well and field up to 99% water. You have a gross production and 97-98% is water, so only 2% is real oil, so you have a lot of water to process and to have some chemical treatment in order to be able to inject it again and to continue with your secondary water recovery project, so it has a huge impact in this water treatment in Golfo San Jorge Basin. Maybe in Austral Basin it's not like this. In Austral Basin, you produce mostly gas and liquid is a little proportion.

GB [00:20:25]: What are the biggest challenges in managing this water treatment?

FD [00:20:34]: Well, the highest challenge could be maybe corrosion because in some cases, well, most of the water production is corrosive due to the sulphuric acid and well, the dioxide carbon, but dioxide carbon is not involved with the water treatment, but maybe it could be as a solution or something like this, but all the facilities are involved with a lot of corrosion, so they need to treat it. Besides that, you have a lot of bio activity like bacteria and you have to biocide them and well, you have to treat the water due to this bacteria activities in order not to introduce again some potential corrosive situation.

GB [00:22:06]: How good is CGC at managing this?

FD [00:22:13]: I think that they manage. There is no magical solution for these issues. Bacteria depends on pressure, temperature and a lot of situations and it's very difficult. You need a continuous treatment in order to control them. You cannot eliminate bacteria. You have to control them and to avoid the growth, but you can reduce it. You have to deal with them because it's almost impossible to reduce them.

GB [00:23:04]: Is there any specific equipment that's needed to manage this?

FD [00:23:11]: No, it's not specific. It's a typical facilities for the oil industry. They used to have some batch process in the water plant treatment, and then in the water injection wells, sometimes you have some continuous pumps in order to inject maybe five litres per day or something like this as a continuous little flow in the injector well and no more than that.

00:23:51] How significantly is electricity consumption driving up costs across CGC's mature fields?

FD [00:24:04]: Well, the electrical consumption is very relevant in Golfo San Jorge Basin. It has the highest artificial lift system installed, so they need electricity to continue operating. The highest consumption is there, but besides that, in this basin, CGC has a strong strategy they have their own power plant. You have in Golfo San Jorge in the central basin is concentrated the power plant with some electrical generators that works with acid gas, so you have two gas production in Golfo San Jorge. The sweet gas that is almost ready to be sold with the specification to be sold as natural gas, and then the acid gas with some sulphuric acid with some carbon dioxide or something like this. This is called some colloquially called, acid gas, so this acid gas is very expensive in order to be sold as a sweet gas, so they decide not to treat this gas and they use this gas as an input for this power plant in order to burn and to have some electrical generators, and then these electrical generators provide the electricity for all the CGC fields and the electricity is sold to the national 500 volts network, so they used to sell electricity too.

GB [00:26:46]: But not anymore. Is that correct?

FD [00:26:51]: No, they use and they continue, excuse me.

GB [00:26:54]: For the basin that doesn't have that – I believe you said it was the San Jorge Basin – how much more expensive are electricity costs becoming?

FD [00:27:19]: The electricity cost, it's expensive. It is cheaper to have your own power plant because it's cheaper to manage or to deal with your own power plant and to sell the extra electricity generator instead of the situation of buying electricity and try to condition the gas in order to be sold, so I think that they are on the right way doing this with this power plant.

00:28:10] How much capital is required annually to maintain operations in CGC's older wells? Which pieces of equipment need servicing most often?

FD [00:28:39]: The capital, I don't manage sadly, I was involved with some fields and with some project by project, not with the whole company budget, but I've seen that maybe if you focus on some typical Argentinian wells, you could see maybe a traditional well has a rig oil intervention every 18-20 months, something like this as an average. Each rig intervention needs around USD 70,000 or something like this for this intervention every 1.5 years, up to two years, no more than that. If some well needs some rig intervention, some maintained rig intervention within less than 12 months, it is considered as a problematic well, and it needs some extra analyse in order to determinate what has really happened there because there is a budget consumption that is not normal for the field.

GB [00:30:22]: What most often goes wrong in wells?

FD [00:30:27]: It depends on the well. Yes. What was wrong or maybe the failure cause, it depends. It could be some pump issues, some downhole pump issues in some cases. In a lot of cases, could be some cycle-related failures in less situation, some tubing failure, but there is no unique cause. It depends on the artificial lift system that you are analysing case by case. It's not the same for an electrical submersible pump compared with a progressive cavity pump or sucker rod pump . It depends on which artificial lift system you have installed on the well, but mostly, it depends on this situation, pump or sucker rod in the electrical submersible pump, sometimes it could be the wire, the electrical wire to the pump. No more than that. It's very simple, but very cost to repair.

00:32:05] How is CGC managing supply chain inflation and lead times for buying specialised equipment?

FD [00:32:20]: They deal with the inflation. Well, here in Argentina, there are two inflations. Most of the contractors have two currency contracts, one in Argentinian currency, the Argentina peso for the local suppliers, maybe for the local crews and something like this, and then some US dollar contracts for material suppliers. Maybe if you have to provide a pump that is manufactured maybe in another country or something like this, this pump is completely in US dollars, so the inflation in US dollars is moved through the American inflation. It doesn't have a real impact in the Argentinian oil industry. The American inflation, how much is 4-5% per year, something like this. It has no really impact here. Besides that, they adjust their numbers compared with this American inflation and no more than that, and the local contracts move through the Argentinian local inflation. This is adjusted maybe every six months or something like this, it depends on each contract. In some cases, they used to review once per year and no more than that. Well, it depends.

00:34:35] What does CGC's relationship look like with local and international equipment suppliers?

FD [00:34:46]: Here in Argentina, you have a little few manufacturer for oil industry, so most of the materials are produced in another country, and they have to ship here and well, almost all the industry has international supplier. They manage almost… I think that you could say in a gross way that maybe 70% of the costs are in dollars, something like this.

00:35:33] How sustainable are CGC's recent cost-cutting measures? How much efficiency do you think was gained by modernising rig equipment and operational tools?

FD [00:35:54]: Well, they have some operational tools that needs some optimisation. I think that this optimisation depends on the suppliers and the strategy that CGC could request to their suppliers to implement new technologies and trying to optimise cost.

GB [00:36:42]: Is that easy to do?

FD [00:36:47]: It depends on the situation. For example, I was involved in some new technology projects. I used to work with a supplier shipping some fibre sucker rod from the US to Argentina and then to implement here in Golfo San Jorge Basin it has an extra cost around 3x compared with steel sucker rod, but when you analyse where do you install this special material and how they perform, it was very convinced because it was used in some oil problematic wells with some failure index or with some failures every six months, and then with this new technology, they used to work up to two years and with some production increase around 3.5x compared with the previous situation, so when you analyse the oil production and you analyse that you have no more the problematic well, the final result was very convenient.

You have to work case by case with the provider and then to implement in some specific situation, but when you find, when you could identify as a technical, maybe production engineering or production management, you could identify this problematic wells and you could identify a provider that provide you a new technology or maybe a technology that is not new, it's not a worldwide new technology, but it's new for Argentinian situations, and you could incorporate this technology here in Argentina and you could have better results, and then you optimise and have a lot of good results. It was a good project.

00:39:51] What do you expect to see in terms of CGC's operational and maintenance costs going forwards?

FD [00:40:03]: In the coming years, I think that the operation cost needs to be reduced in order to continue with the current trend of optimising process, so you should monitor the lifting cost field by field and looking for the topics or the activities that are not well balanced with the budgets because there are a lot of maybe not productive times that you could reduce, maybe you could… Well, they are doing this too. They are working with the unions to in order to reduce the… It's not leisure time like the like a break time for the crews. Well, they are trying to eliminate this break time in order switching the crew members. Not to have a break time altogether in a rig, maybe half hour or something like this in a break time, so they are switching to diagram with 2x2 or something like this in order to have a continuous operating activities. This union negotiation improved the productivity. Well, maybe a few years ago, you used to have one hour per day with no operation due to these break times, these crew break times and nowadays, they are trying to don't have these situations anymore.

GB [00:42:26]: Overall, do you think this will help to decrease costs, or will it just make them more efficient?

FD [00:42:33]: I think that they are looking for highest efficiency.

00:42:38] How will the severe winter weather in southern Argentina slow down CGC's maintenance and potentially cut gas production?

FD [00:42:56]: Well, the winter weather is very aggressive, mostly in Austral Basin because of the latitude. The western field used to have in winter up to 6ft snow on the ground, so it's very impossible to reach the oil wells. In this situation, in some winters, there were some wells that couldn't be visited by the crew production for two months, something like this, and it's a very long time to have a flowing well with not crew supervision, and they are trying to improve the situation with some… Well, besides the heavy machines to remove it now, they are trying to work with some downhole tools. Well, I used to propose some downhole tools that work properly in this situation, and we developed with some Mexican company, the downhole inventory system for the gas flowing wells in order to improve the gas productivity. It has a good performance and it warranty continuous gas production during this winter season when nobody could reach the well location.

GB [00:45:24]: Overall, do you think that CGC is good at mitigating the effect of this severe weather?

FD [00:45:35]: I think so. They try to mitigate it. Every winter is not the same as the previous one, but almost all the winters has a lot of snow, some icy roads and things like this, but they are trying to mitigate it. Besides that, Golfo San Jorge Basin, there are some winter issues, not so strong as Austral Basin, but they have some issues too. Well, they mitigate a little bit easier, but well, they have to work on this situation. In Golfo San Jorge, it's very common to have maybe in the western fields, 1ft snow or something like this compare it with the 6ft in Austral Basin. It's not the same situation, but when they removed the snow and they used to… Well, they threw salt on the roads and things like this, and they could manage very properly.

00:47:01] I believe CGC's drilling activity has slowed to 11 wells in H1 2026 compared to 79 in 2023. Is this a deliberate strategy, or do you think it's reflecting operational issues in the company's more mature assets?

FD [00:47:27]: I think that during the previous years, the company's strategy was to drill the wells according to the 2020 Golfo San Jorge asset transition, so they drilled several wells during, I think '22, '23, something like this. They used to drill several wells. Well, the rigs that used to have expensive crews or expensive contracts has their contract ended. Well, they had around 1-1.5 years with no rig activities, and then they started working on some new contracts with better contract conditions for the major company. Well, they use as a negotiation, the lower activity, the continuous crew positions and things like this working with the unions too, and they could have a new negotiation with better conditions for CGC. They use maybe as an aggressive campaign to reduce cost.

00:49:29] How many wells need to be drilled for CGC to sustain production? What level of drilling would grow production?

FD [00:49:40]: To sustain production, I think that you have to drill around maybe 40-50 wells per year, something like this in order to have or to have a permanent oil production amount or something like this.

GB [00:50:11]: How would you split that between Austral and Golfo San Jorge?

FD [00:50:22]: I think that you could switch maybe you need to concentrate this rig activity in Golfo San Jorge Basin, and then in the current Austral Basin situation, you need maybe 5-10 wells per year in this current situation. Besides that, if the Austral Basin decide to develop the Palermo Aike formation, I see that it needs a very non-convention and aggressive campaign. In order to develop a new player like Palermo Aike, you need maybe the 50 wells per year there, so you need a lot of rigs and suppliers working together, and very huge challenge there in Austral Basin is the scale of the development. It's not the same drill only one well with all the fracking trucks and pumps, all the fracking pumps moving from Neuquén Basin up to the southern part of Argentina, only for one well and then compared with activity with a lot of wells. I think that the scale could reduce significant cost in this operation.

00:52:38] How much does it cost to drill a well today? How would it differ if it were done at scale, as you mentioned?

FD [00:52:48]: Only a well in Austral Basin, I think that only one with all the logistics could be maybe USD 40m, something like this, only one. If you scale it with several wells on something like this, I think at first, you could reduce maybe 20-30% and then you could switch maybe as compared with Neuquén Basin. Neuquén with five years of development reach almost the 50% cost reduction, but with a huge scale, but after five years, they reach almost the half price.

00:53:51] Looking at the market more generally, what key trends in Argentina's upstream sector are affecting CGC the most? How sustainable is oil production growth in Argentina?

FD [00:54:14]: How stable is the oil production? Okay. I think that the oil production is stable there are several major companies, and besides that, there was local reorganisation due YPF used to… Well, sold this year, this past year, the conventional assets to regional companies in order to concentrate the effort in the non-conventional assets with higher productivity, so this lower asset with these small companies have a small structure with maybe some domestic suppliers, and they could reduce cost for mature fields, so they could produce this mature field with lower cost and they could warranty in some way this oil production in mature fields. Besides that, here in Argentina, there is current huge pipeline in construction called VMOS that it has an extension from Vaca Muerta to the sea in order to set a port, an Atlantic port to export oil and gas, so this is a dual pipeline. They almost finished the first one. They are working on the second one right now, so since they are working on this pipeline, several companies are improving their budget in Vaca Muerta, so they are planning to increase the Argentina productivity in order to export at least twice or maybe 3x more than the previous year.

GB [00:56:58]: Do you think that's achievable?

FD [00:57:02]: Geological, yes. It depends on the budget and the companies involved developments, but I think that geologically, it's very possible. Well, they are working on this.

GB [00:57:23]: How will government regulations in the sector potentially change that possibility, or the growth potential?

FD [00:57:37]: Local governments are looking for this investment in order to increase the oil and gas production and exportation in order to receive the incomes. The Milei government receives some taxes besides the companies invest and the company exports when they export the local government receives some incomes regarding taxes, so the local government have a huge interest in order to develop these players.

00:58:37] Do you think there are any countrywide regulations that pose a risk to the growth of oil production in Argentina?

FD [00:58:49]: Risk like potential regulation, something like this. It depends on the political issues, but I think that with this current government and commercial market, I think that there is not a significant influence because I think that the Milei government here in Argentina is very open mind with some new projects with some private development and things like this. I think that they make the effort to have a new invest and new companies in order to produce and to have a higher budget for the country.

01:00:28] How quickly can CGC shift production towards higher-margin crude oil rather than natural gas?

FD [01:00:40]: I think that they need to produce the conventional wells as the way they are doing right now, and they need to look for maybe new joint ventures or new strategy to get involved with these non-conventional assets. Maybe with this major pipeline that they are working on, they could develop some new non-conventional strategy in order to get involved in a higher position in Vaca Muerta assets. I think that they need to focus there besides they are very strong in the conventional players. Besides that, I think that they need to take an aggressive strategy in Palermo Aike asset as a non-conventional player, but I think that they need to work there in a joint venture, not as a single player.

01:02:13] How well-placed do you think CGC is in the market compared to other players?

FD [01:02:30]: I think that they need to continue working in this way and to increase budget in the non-conventional in order to be competitive.

GB [01:03:05]: Without doing that, do you think that the company will be competitive with other players?

FD [01:03:17]: I think that if they keep the current strategy, they continue competitive, but not a high competitive compared with the major players in Argentina because the major players are focusing in the non-conventional in Vaca Muerta. I think that if CGC wants to grow, the only way is to increase their position in Vaca Muerta, at least in the in the following years. Maybe if they could develop and make a great effort develop some non-conventional assets in some fields that they are operating right now, it could be, but you have to develop a new field with a lot of infrastructure and it's not immediately. I think that if they want to grow immediately, they need to showing some project, maybe some current project or some projects that could be growing right now in order to increase the income. Besides that, they have a lot of potential with Palermo Aike as a non-conventional asset, but it's not development right now.

GB [01:05:04]: We will now conclude the Interview. Thank you so much for your time today. I really appreciate it. I really enjoyed the discussion.

Transcription ends at 01:05:55 of the recorded material