What new initiatives is Repsol Energy currently involved in around North America?
RIBBECK: We are involved in a number of new initiatives around North America. We are growing our North American trading and marketing business in natural gas. We have been involved in the Northeast, particularly New England, for a few years. Now we have expanded into the middle of the continent, and to the Atlantic coast. We are also present in the Southeast, the Gulf Coast, and the Appalachian valley basin. Our focus is bringing together supplies and markets, and making sure everyone has what they need to produce their gas economically, and to buy their gas economically as well. When the Canaport LNG facility opened in 2009, we were already in the marketplace. We had customers already arranged for the gas supply, and we were able to move gas to the market freely and profitably.
What is Repsolâ€™s current business mix in North America? Which lines have the biggest potential for growth?
RIBBECK:Â In North America, Repsol has many operations. Our Exploration and Production (E&P) business is our largest growth engine. Our North American gas and power business is also a substantial growth engine. We have E&P operations in the United States, Canada, and Mexico. We have contracts to develop fields in Mexico that have been at low levels of production for some time. Our goal is to bring them up to higher, sustainable levels of production. In the United States, we are involved in the deep water Gulf of Mexico, where we have been the operator, and a participant on many leases. As an operator, we drilled the discovery well for the Buckskin prospect. We have other acreage in onshore Louisiana, where we will be drilling a well next year. We are in a joint venture with Sandridge in Oklahoma and Kansas involving the development of the Mississippi Lime play. We are also in Alaska. We have been drilling wells since early this year. Hopefully, the success of these wells will be known soon, and we will have much bigger developments in the pipeline there. We are involved in other parts of Canada as well, in offshore Newfoundland, and Labrador too. Our partners will be drilling a well sometime during the end of this year, or the beginning of next year. An exciting part of our business is our North American trading and marketing. This has been growing very well. We entered into North America as Repsol with the Canaport LNG facility to move to, what was at the time, the most important market in the world for natural gas. We still have the largest market for natural gas in North America. At todayâ€™s levels of pricing, we are not the most valuable market. Our market from time to time during the winter can be the most valuable though. This February, the pricing in our marketplace was the highest in the world. In North America, with our Canaport LNG position, and with our ability to bring LNG to serve the New England marketplace, we saw synergies with other parts of the market itself. With that in mind, we adopted a strategy in 2011 to grow our business into several other parts of the continent. Our business plan is now to expand past New England into the rest of North America, and to become profitable.
How does the price of LNG impact overall operations for you?
RIBBECK:Â When Repsol first started looking at Canaport LNG as a business, the worldwide prices showed North America as the most valuable marketplace. Since then, we have had numerous things happen in the world, including an incredible increase in the price of oil. Outside North America, most prices are set on oil based type structures. Therefore, the prices for LNG internationally went up. In the United States and Canada, we had a shale boom. Shale gas was creating a significant amount of supply. There was an over supply of natural gas from North America. We became an energy island for natural gas. Our prices were low while worldwide prices were high. This meant there was less LNG available to bring to the Canaport terminal. Even though you are paying fees to sustain your capacity in the pipeline, as well as in the LNG facility, if prices in North America are only $4-$5 per MMBtu (Million Metric British Thermal Unit), and you can get $16-$20 in the international marketplace, that is where you need to put your gas supply. We have been moving more and more into that area. Our marketplace is very strong during the wintertime. We still enjoy the benefit of bringing LNG into the marketplace, and getting prices that are better than the rest of the globe.
What environmental precautions does Repsol take?
RIBBECK:Â When it comes to the environment, Repsol has policies to do all we can to ensure that very little damage, if any, is done to the environment through our operations. If any damage is done, we will do everything we can to mitigate it. In Canaport LNG, we had a number of new requirements from the government to restore wetlands. We did nothing to destroy any wetlands, but we took on the obligation to restore them. Our partners in that part of Canada are also dedicated to making sure that area remains pristine. We undertook certain programs and supported our people there. Our policy is to do everything we can in order to avoid damaging the environment. We have to look at how we develop all of our projects. We must ensure the things we do will not have any negative long-term effects that can hurt others. We do not want to poison peopleâ€™s water. We do not want to destroy the beautiful environment in Canada. If you look at our Canaport facility in Canada, you will see it is a lovely green facility. When I am there, I always wonder where the condominiums will be built, because it is a beautiful sight. We do our best to make sure there are no spills at any given time. We take extra precautions. Sometimes accidents happen. That is the business. That is life. When something happens, it is how you react and the actions you take afterwards that define you. Repsol is very serious about making sure any damage is repaired very quickly. Our goal is to make sure no accidents happen in the first place. We undergo extensive training to make sure people know what to do, and know the procedures to follow to avoid spills. We do this in order to avoid long-term emissions that could damage the atmosphere as well. Repsol is proud of its track record. We are proud of the things we do, and we are at the top of the list when it comes to how we deal with these processes.
If prices in North America are only $4-$5 per MMBtu, and you can get $16-$20 in the international marketplace, that is where you need to put your gas supply.