Perupetro, Peru's national hydrocarbons agency joined the Global E&P Summit to discuss Peru’s upcoming licensing round, great oil and gas potential and reveal available and future business opportunities. As part of the preparations, I had the opportunity to have an extensive interview with Daniel Hokama, General Manager of Perupetro.
One of the most common questions we get is "What is the difference between Perupetro and PetroPeru and what is the role of the organization within the country?”
I'm going to start by explaining the difference between Perupetro: that is our company, and Petroperu. Petroperu is the National Oil Company of Peru, working mostly in midstream and downstream. They are looking into returning to upstream activities, which they stopped in 1993. Perupetro, is the National Hydrocarbon Agency of Peru. We are in charge of the promotion of hydrocarbons, negotiation, supervising of the contracts and we are working very hard in promoting laws and regulation to incentivize investment in upstream.
If a company wants to look into investment opportunities in Peru, whom should they approach?
When talking about upstream opportunities, Perupetro is Peru’s promotion agency, working very closely with the Ministry of Energy and Mines. The Ministry of Energy and Mines is in charge of issuing the laws, regulations, and of course, the direction of the country, in terms of mining and energy.
We know that it is very important to develop our hydrocarbon resources in an efficient way. We are a small country with a lot of potential. We have 18 basins, with only five currently producing.
We have no developments in offshore, so there is a huge opportunity for IOCs to be the first one here. We have only a few companies that are just exploring nowadays, but we already signed agreements with majors such as BP, and Tullow Oil.
We also have IOCs that are very interested to take a look into our offshore basin.
Perfect. When are the offshore blocks opening? Will it be through a licensing round, open door or direct negotiations?
Well, we have a regulation that we are working to change because we want to open our market to all kinds of companies: If an IOC is in the top 100 companies in oil and gas, they can express interest directly with us, provided there is no other IOC interested in the same area. If we have two companies interested in the same area we have to open the market, through a bid.
We have no bonus pay, and our whole database is completely free for all interested companies to access information. In order to gain access you have to request it from Perupetro and process it by yourself. If we have processed information on a block then we also provide it as well.
We are very open to new investments, and we are working very hard in environmental and social issues. We promote coexistence of hydrocarbon activities with fishery, tourism, and agriculture and many more.
We are currently working on the communication of and how important energy is for the development of Peru.
How are you tackling communication challenges? Is it through communication strategy and planning you have in place? Is Perupetro actively involved as an authority? How do you go about it?
Perupetro is very involved in that, with a clear plan to explain the benefits to people and debunk urban legends and myths. Redefining vocabulary is also a key priority as “seismic” and “exploitation” can have negative connotations and mislead people in terms of activities.
Regarding coexistence, actually, in the lower part of our country, we have a very nice beach with small abandoned oil platforms. We were in the process of decommissioning them but the divers community asked us not to do it, because under the sea, under the platform, an entire micro-environment of fish was created, including corals and everything there, so the divers go there and have developed a tourism activity out of it.
They use the platform to dress, put all the equipment and then dive underneath. This is another sign that the hydrocarbon industry and the tourism industry can coexist. In addition to that, the fish that are around the platform are food for bigger ones, so the fisheries start to fish around the platform.
So, there is only the matter of explaining and communicating how we can all work together here.
The hydrocarbon industry in Peru is a formal industry that cares about all the safety and environmental issues, and we expect the same from all our partners. With our assistance, of course.
The reputation of our activities is very important and we have to have sustainable development of all the industries that are developing in the country - in this case in the sea and in-land as well.
This is beautiful. It's really important for a national entity to also care for these matters.This puts us in a position for the next question: What are you currently looking for from investors? Is it long-term commitment, strong technical expertise? What are the qualifications of your potential investor?
Well, I think this industry is about long-term commitment. We are working on reducing the period between signing a contract, first drilling and production. It's hard because you need a lot of permits, but we are trying to solve that because we understand that reducing the time between the signing of the contract and the producing period is very important.
We are interested in companies that could bring new technology. For example, in the North part of our country, we have areas that are producing for more than a hundred years and are still producing oil with very good quality. So, we have a great opportunity to start applying new technologies.
We have a huge variety of basins in Peru. We are inviting companies with that type expertise in risk management, including the ones that want to invest offshore, the ones that want to invest onshore, on the North part of the country, beside the beach where you can develop your activities as not only an oil company, but also as an energy company.
We have major opportunities to develop renewable energy there. Companies can compliment their activities in order to reach their goal, not only as an oil company, but as an energy company as well.
On the other side, we have the jungle, which is interesting to another profile of investors. You have to be more resilient, to understand and have excellent logistics management. The logistics are very important there, and you have to work a lot with the local communities.
Then, we have the South part of our country that is mostly gas and liquid natural gas. Our biggest project there as a country is Camisea, our biggest source of hydrocarbons and our main source of natural gas exports.
We call it the “offshore onshore” because it's a project in the middle of the jungle. A very small area completely isolated from anything. We take great care to respect the environment, that's why we call it offshore inshore.
So investors can choose: you have the North part, the offshore, the jungle and the South part. Essentially, it depends on what you are looking for. We are open to all kinds of companies.
What are the blocks that you have available for companies right now? How could someone express interest and what is the procedure?
We are planning to start a bid next year. We will be having around eight mature blocks for companies to bid on, and we are looking into combining some blocks in order to have the option to bid for larger areas. Regarding the mature blocks, some of them have more than a hundred years of producing oil, with a little bit of associated gas. But within that, there is a good opportunity for medium and small companies as well. The mature blocks are just beside the cities, so logistics are not a problem. You have power there, access to roads, making the logistics very easy.
They are blocks ripe for new technology to come in. If you are a company that wants to apply new technology, we can offer you a very, very attractive tax framework, legal framework and opportunities to develop this technology.
Regarding the Peruvian in-country industry - how can Peruvian companies support these new entries in Peru, in terms of technology, staff, and manpower?
That is a very interesting question. Actually, there are some Peruvian companies that are already there, producing in those blocks and their contracts are finishing. They are very interested to maintain the areas, but they have to compete, they have to make a bid. This is going to be a good opportunity to create joint ventures or alliances with different companies - with companies that maybe are interested in investments in Peru and want to partner here.
Petroperu, Peru’s National Oil Company, is very interested in being part of those blocks in a bid. Maybe with a small part, in order to give support to new companies such as medium and small companies that want to enter the country.
As most mid-sized companies are facing financial challenges with COVID-19, and banks are hesitant to fund projects before a contract is secured: If a mid-sized company is interested in investing in Peru, how can they compete financially? Is there flexibility with that in terms and conditions?
Perupetro has already proposed a new regulation to the Ministry, promoting joint ventures between somebody that has the capital, but doesn't have the experience and companies that have the expertise but don't have the capital. From this year onwards, you will be able to create that type of venture. This is going to be a very important measure in order to promote new investments in Peru.
We are currently promoting a new royalty framework for reducing the bureaucracy and promoting new technology. But the best part is that in Peru’s upcoming Licensing Round, our acreage is already producing.
This means that cash flow is going to be very fast, almost immediate.
Thanks to this preparation and advantages, the round is going to be very competitive.
We are currently analysing the areas to see the potential and we are planning to potentially start the bid process mid-year in 2021.