The Peruvian hydrocarbon industry has experienced strong growth in the last 10 years. During this period, total production of crude oil, natural gas and natural gas liquids (NGLs) increased almost four-fold, while investments in exploration and development recorded a similar jump.
However, two opposing trends have emerged within that overall growth. On the one hand, the production of natural gas and NGLs has been growing at a dizzying rate since 2004, when the Camisea project located in the Peruvian Amazon initiated operations. On the other hand crude oil production has steadily declined, with current production levels reaching just a third of those recorded at the beginning of the 1980s.
These inverse trends, which have caused an abrupt shift in Peru's energy matrix during the last decade, look set to continue. Together with Camisea's abundant gas reserves, improvements in transport and distribution capacity in the coming years will provide additional incentives to increase production in those blocks. Meanwhile, the lack of major discoveries of new oil reserves in the last thirty years, contractual models which are not sufficiently attractive to stimulate new investment and delays in granting environmental permits threaten to maintain falling levels of oil production.
This context, together with the decrease in crude oil prices and the worsening of social conflicts in regions close to oil fields, has reduced the attractiveness of Peru's hydrocarbon sector in recent years. The tender rounds for exploration and production launched this year have also failed to recover lost ground.
This report analyzes hydrocarbon production trends in Peru, and the main factors which are curbing the development of the oil sector. It also identifies opportunities which are emerging through the development of transport infrastructure projects, as well as the ongoing tender rounds.
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