China's CNPC to invest US$2bn in Peru

Tuesday, May 23, 2017

China's CNPC plans to invest US$2bn over the next six years to develop its block 58 natural gas field in Peru's southeastern jungle, a government official said.

CNPC formally notified the government of its investment program over the weekend after making a 3.9Tf3 natural gas find last year, said Rafael Zoeger, president of state hydrocarbons contracting agency Perupetro. It marks the largest investment project in Peru's hydrocarbon sector since a Hunt Oil-led consortium brought online the US$4bn Peru LNG plant in 2010.

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CNPC, which is looking to drill additional wells and build a processing plant at the block in the Ucayali basin, may export gas if it's unable to supply a potential petrochemical project that would link up with the southern Peruvian natural gas pipeline, Zoeger said.

Transportadora de Gas del Perú (TGP) may also expand its Camisea pipeline to ship CNPC's output if the southern pipeline isn't ready, he said. The southern pipeline was suspended at the start of the year due to operator Odebrecht's difficulties in securing financing.

"Camisea took four years to build, so we're hoping this project will take about the same amount of time," Zoeger said during a meeting with foreign correspondents in Lima. "The gas could be available by 2023."

CNPC's Lima office did not immediately return a telephone call seeking comment.

Other oil companies in Peru are also moving ahead with investment plans, encouraged by stronger crude and gas prices and a government offer to lower royalty terms in exchange for investment and higher output, Zoeger said.

Spain's Repsol is working on a US$300mn project including a compressor plant at block 57, also in the Ucayali basin, while CNPC plans to spend an additional US$40mn drilling 60 development wells in north coastal block 10. In addition, US firm Olympic Oil is looking to invest US$22mn in 22 development wells in block 13 in the same area, Zoeger said.

Australia's Karoon Gas is also scheduled to start Peru's first deepwater offshore drilling program this year in block Z-38 off the north coast, according to the official. Dallas-based Hunt Oil, meanwhile, has yet to officially notify its intention to pull out of block 76, as reported recently in local media, Zoeger said.

Peru still hopes to hold bidding rounds for a package of 54 exploration and production blocks in the second half of 2017 once the government pushes through reforms aimed at reducing royalties, downsizing blocks and making contract terms more flexible, he said.