Flush with challenges, Peru’s oil sector now lacks toilet paper

News that workers at Peruvian national oil company Petroperú’s Talara refinery will not have access to toilet paper, paper towels or soap due to budgetary issues was the tipping point for many.

As comical and insignificant as it may sound, the product shortage reveals just how far the NOC's financial distress has reached.

The situation arose after the termination of a cleaning service contract at the end of November.

Even cabinet head Ernesto Álvarez acknowledged Petroperú’s precarious position.

“The first thing that must be done is to cut off the irrational financing that, out of fear of the political consequences, has continued to be given to a company that is bankrupt, no matter how much they try to manipulate the figures,” Álvarez told local paper Expreso.

The official's comments reflect growing criticism of Petroperú’s management and rising calls to open the state-run operator to private capital.

Read Unbundling pitched as transformation option for Petroperú

Even private upstream operators have flagged Petroperú’s cash crunch, highlighting in a letter to President José Jeri that the company has failed to pay US$120mn for crude purchases, potentially impacting their operations.

For María Alejandra Ormeño, public policy head at think tank Instituto Peruano de Economía, governance is one of the key factors behind the company’s situation, particularly the frequent change in board leadership.

“There has been a rather profound institutional deterioration… which has definitely affected the company’s performance, but also there is an issue not only of profitability, but also of production, of productivity,” she said in an interview with local communications platform RCR.

In recent weeks, Petroperú has appointed a new chairman and general manager, with authorities saying the move is aimed at strengthening strategic and operational management.

The continual shuffling is not limited to Petroperú, with recent changes also affecting the hydrocarbons vice ministry at the energy and mines ministry and hydrocarbons licensing authority Perupetro.

This revolving door has broader implications for Peru’s oil and gas sector, leading to a loss of investor confidence at a time when the industry needs to attract investment to revive exploration and production activity.

Read Peru reports dip in upstream hydrocarbons investment

In November, crude production in the country averaged 36,561b/d, compared with 42,420b/d in October and 45,150b/d in the year-ago month.

Gas output last month was 38.7Mm³/d, flat sequentially and down 9% year-on-year.

(The original version of this content was written in English)