Peru does not have the oil potential of Venezuela, Mexico, Brazil or Argentina, nor the gas potential of Bolivia. However, the consensus in the industry is that, with an appropriate incentives strategy, its production could be much higher than at present. One piece of data is enough to show the decline in the sector: last year, oil production was half that of a decade ago, and a third of that of 20 years ago.

The outlook does not look like changing in the short and medium term because there are no signs of exploration investment picking up significantly. Why? The lack of an investment stimulus policy together with an absence of significant finds in the last 10 years and almost zero geological information on the areas that could be awarded. These factors, plus the delays in obtaining the necessary permits to begin exploration, are stymieing new investments. In fact, Peru is the only hydrocarbons country in Latin America where no major operates.

Faced with this scenario, the government of President Pedro Pablo Kuczynski and hydrocarbons licensing authority PerĂºPetro are about to send to congress a bill to amend the organic hydrocarbons law, as well as complementary regulations, in a quest to reverse the fall in production and exploration. Nevertheless, companies and analysts in the sector anticipate that the changes under study will be insufficient to reverse the negative trend.

In this report we outline current hydrocarbons production and exploration in Peru, explain the obstacles to the development of the sector, analyze the reforms underway and under study, and finally we describe the country's transportation infrastructure.

Figure: Oil Production


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