Peru is a country with a long history of successful oil and gas production, lead by a proactive hydrocarbons authority, Perupetro. With renewed investor interest directed towards Latin America, Perupetro's upper management speaks about its latest upstream opportunities, mature field development and more, on this interview.
Peru currently has 26 exploitation contracts and 12 exploration contracts signed with oil & gas companies. What does the permit map look like?
"As you can see in the permit map, investment in hydrocarbon exploration has considerably reduced due to the price crisis and to COVID 19 pandemic, also some companies stop production during this period, but fortunately at the moment they are recovering and we are optimistic that for next year, if the oil price remains stable, we will have more exploration activities and also attract new investment to the country, which is important to increase oil & production and revert the hydrocarbons balance of the country."
- Peru has more than 12,518 BCF of proven gas reserves, with potentially more than 30,000 BCF prospective resources. Do you have plans to unlock the country’s vast gas resources?
"We have still a huge potential in natural gas in the coast on shore and offshore and also in the jungle area mainly in Ucayali and Madre de Dios basins, in order to develop these resources is important to work jointly with the regional authorities to get their social and environmental consent. Is for this purpose that PERUPETRO is working closely with regional governments in order to stablish Master Plans which allow coexistence of hydrocarbon activities and other activities in order to benefit the country with the development of natural gas projects."
During Perupetro’s presentation at the 2nd Latam & Caribbean Oil, Gas & Energy Summit, it was mentioned that there are opportunities available with cashflow from Day 1. What are these opportunities? How can an IOC access them?
"Yes, PERUPETRO S.A. is promoting six blocks of the Talara Basin whose contracts will expire in the next few years. The purpose is to improve the productivity of these mature fields with secondary recovery and the implementation of new technologies.
Companies which are interested in these contracts will have positive cash flow since the first day because these blocks are producing. Any company can access our data bank through PERUPETRO’s website to obtain the packages of information of Northwest blocks, interested should write to: lotesnoroeste@perupetro.com.pe and ask for authorization to get the information packages. of new technologies."
During the same presentation, Perupetro presented the five principles of Peru’s contracting framework, garnering praise from the audience. Would you like to walk our audience through them?
"Oil & Gas contracts in Peru are ruled by the General Hydrocarbons Law – Law 26221, contracts are mainly License Contracts, for which the company has to pay a royalty to the State when production starts, we have also the possibility of Services Contracts for which the State pays a retribution to the contractor.
Contracts have a period of 30 years for oil and 40 years for natural gas, the exploration phase is of 7 years which can be extended for 3 more years.
During the exploration phase, the work units in excess may be carried forward to the following period and companies may accredit multiclient data."
Can an IOC enter the country through an open round or direct negotiations? What does the general selection process entail? Is there a specific process to attract Top 100 E&P companies?
"Yes, the IOC can enter the country through an open round or selection process. In case of direct negotiation at present we are including some adjustments to the internal guidelines of PERUPETRO in order to obtain more flexibility.
The general selection process, implies that the bidders shall fulfill with the minimum requirements established in the bidding conditions or in the oil companies qualification bylaws
Any selection process will be launched through our website and announced to the interested companies, it should be noticed that the information is free of cost."
What kind of contracts does Peru use for E&P agreements? Is there a signing bonus? What are the main fiscal and tax incentives offered to international investors?
"Peru basically offers adhesion contracts were it is only negotiated the work program, royalties are not negotiated, there is already a fixed royalty from 5% to 20% depending on the production level and from 5% to 25% depending on R Factor.
As per Law 26221, General Hydrocarbons Law, contracts may be negotiated directly at request of a company or granted by a Bidding Process.
There also exists the possibility of signing a Technical Evaluation Agreement (TEA) for areas with little information with the possibility of having the first option to sign a License Contract.
There does not exist signing bonus, companies are asked for a bond to guarantee the work program. Fiscal incentives are basically the recovery of IGV (value added tax) during the hydrocarbon exploration phase, and tax stability."
What are the available opportunities for service providers looking to invest in Peru or partner with IOCs?
"There are always opportunities for services companies, in these days in there will be contracts close to end, the new work programs for the new contracts will open possibilities to rehabilitations, reconditioning and well drilling in the country.
Also the possibility of signing multiclient agreements to collect new information or reinterpret old one in order to give it more value and diminish the geological risk is a good opportunity for services companies."
How can infrastructure-focused service providers assist Peru with meeting its natural gas demand?
"Regarding upstream, the Implementation of new technologies which reduce production costs will be very helpful.
In relation to infrastructure the southern gas pipeline there is a bidding process ongoing, Proinversion, the state company in charge, has finished the preliminary studies and plans to launch the bidding during the second semester of 2022, this is an opportunity for services companies, the completion of this project will help to increase natural gas demand in the southern part of the country."
Discover Peru's latest opportunities
You can find Daniel Hokama, General Director of Perupetro, inverview at The Energy Hall of Fame podcast here
My interview with Perupetro's technical department here