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  HOME | Peru

State Oil Firm Given Authorization to Take Over Peru’s Largest Oil Block

LIMA – Peru’s Congress has given state-owned oil company Petroperu authorization to develop the country’s largest oil block despite the opposition of President Ollanta Humala’s administration, which said the move is unconstitutional because it would increase public spending.

In a vote of 71-10 with two abstentions, Congress authorized Perupetro, the state licensing agency for hydrocarbons concessions, after prior evaluation, to directly award a production contract for Lot 192 to Petroperu.

The legislation, passed Thursday, modifies a law that requires Petroperu to prioritize a $3.5 billion project to modernize and expand the Talara refinery.

While the bill was being debated in the unicameral legislature, Peruvian Energy and Mines Minister Rosa Maria Ortiz warned lawmakers it was unconstitutional because they are only authorized to raise government spending via budget bills.

Petroperu is unprepared to develop the block, located in the northern Amazon region of Loreto, and will need unbudgeted funds to do so, Ortiz said in a press conference.

She also recalled that Humala’s administration recently directly awarded a two-year service contract to Canada’s Pacific Stratus Energy, a unit of Pacific Exploration & Production (formerly Pacific Rubiales Energy), to develop Lot 192.

Non-compliance with the contract with Pacific would have serious consequences for the Peruvian government and the country’s investment climate” because it would raise questions about legal certainty in the Andean nation, Ortiz said.

The congressional vote took place in Iquitos, the capital of Loreto, where civil society organizations staged a region-wide strike on Wednesday and Thursday to protest the decision to award the block to Pacific instead of Petroperu.

Loreto Gov. Fernando Melendez said the bill passed by Congress “did justice” to the region’s demands and urged Humala to sign it into law.

During this week’s protests in Loreto, a group of Achuar Indians seized 11 oil wells and an airfield located in Lot 8; that block is operated by Argentine energy company Pluspetrol, whose contract for the nearby Lot 192 expired last Saturday.

Another group of demonstrators clashed with police on Thursday after trying to seize Lot 8’s heliport, although no injuries were reported, police and Pluspetrol spokespersons said.

Pluspetrol, which began developing Lot 192 in 2001, was periodically accused by indigenous federations of polluting their territories and failing to live up to commitments to cover remediation costs.

Lot 192, located near Peru’s border with Ecuador, yields around 11,000 barrels of crude per day from around 16 wells and accounts for 17 percent of the country’s total oil production.

 

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