As regards the relatively recent interest from IOCs to invest in Chile, I have heard maybe too many times people questioning the convenience of their presence in our country. Why should we have them here? Why does not the state act directly keeping all the benefits in Chile? Other voices say that we should only allow Chilean companies to invest in this field…. after all -they insist- there is enough money in the country!
Well, there are many reasons why we should welcome the presence of IOCs, just as most of the oil producing countries do. I will mention two of them;
a) Know How: The E&P business is highly specialized and new costly techniques are being constantly developed for the success of the exploration operations. As someone said, “all the easy oil discoveries have been made and now we have to go for and deal with the more difficult plays”.
b) Investments vs. Risk: The E&P business is a very risky one. The level of investment required to explore (and then develop and exploit oil and gas) is quite high and the chances of success very low. It is what is called “high risk high reward business”. Just to give an example, if you ask a geologist what is a very low risk for finding oil/gas he will probably tell you a 30% chances, that is to say, 70% chances of failure!
Given that level of risk, it is a much better idea to let IOCs possessing the required know how to bear all such uncertainty and, if successful, share the benefits of the discovery with the state. If the exploration is a failure, well, then the IOC took the risk and the state did not “lose” monies which could have invested in other critical areas of the country.