Peru to launch Amazon round next month

Thursday, November 13, 2014

Peru's government plans to launch next month an E&P round for Amazon acreage in a bid to spur investment in an industry beset by declarations of force majeure.

The call will be for four blocks in the Ucayali basin and two each in the Marañón and Madre de Dios basins.

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These are due to be awarded by July, Luis Ortigas, president of state oil contracting agency Perupetro, said at BNamericas' 11th Southern Cone Energy Summit in Lima.

Perupetro will also call for bids for six offshore blocks in March, he added.

An auction of jungle block 192, currently operated as 1-AB by Pluspetrol, has been held up by a prior consultation process with indigenous communities, Ortigas said.

He confirmed that bids are due December 10 for production blocks III and IV, previously operated by Interoil Exploration and Production, with awarding scheduled for December 12.

The Peruvian judiciary may take six months to a year to rule on an Interoil arbitration process after Peru refused to renew its contract for the blocks, he said.

According to Ortigas, oil and gas companies have shown an interest in Peruvian exploration areas despite crude oil prices hitting a four-year low on Wednesday.

"Oil companies invest in the long term," Ortigas said in an interview on the sidelines of the conference. "There has always been volatility in oil prices. We're also offering lower royalties when crude is below US$80/barrel."

A new hydrocarbon environmental regulation, which the government announced Wednesday, should help expedite permitting and boost investment, Ortigas said.

At least 25 of Peru's 70 exploration and development contracts are affected by declarations of force majeure made as a result of either permitting delays or social opposition, according to Perupetro.

Companies including ConocoPhillips, Repsol, Petrobras and Talisman Energy have sold off assets in Peru over the past year.

"We hope the new regulation will enable us to overcome the prevailing weaknesses in these suspended contracts," Ortigas said.

Peru, which has lined up US$33bn in energy projects over the next decade, is struggling to reduce the amount of oil and gas investment red tape, even as crude oil production slumped to 69,000b/d through October, half of 1994's output. Companies drilled just seven exploration wells last year, a figure Perupetro is looking to boost to 30-50.