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  HOME | Peru

Report: Peru Oil, Gas Production Will Fall Sharply without Investment

LIMA – The Peruvian Hydrocarbons Society, an industry group, said gas and oil production would fall to as little as 30 percent of the level forecast for 2019, or less than 50,000 barrels of oil equivalent per day, without new investment.

The Energy and Mines Ministry’s 2014-2025 Energy Plan had forecast royalties totaling $3.84 billion over that period, but the society, known by the Spanish initials SPH, said Tuesday that based on current sector trends the government’s royalty take would amount to just $2.33 billion, or only 60 percent of the projected level.

Transfers to local and regional governments stemming from oil and gas revenues will amount to just 5.94 billion soles ($1.71 billion) through 2025 based on current trends, or 52 percent of the projected level of 11.41 billion soles ($3.29 billion) contained in the Energy Plan.

Five Peruvian regions – Tumbes, Piura, Hanuco, Loreto and Ucayali – would be hardest hit if the society’s projections prove accurate.

The report titled “Looking to the Future of Hydrocarbons: Proposals for Investment Promotion” noted that global oil prices held steady at more than $100 a barrel between 2011 and 2014 but had fallen to less than $40 a barrel over the past year.

To boost investment, the SPH proposed reviewing the competitiveness of the Peruvian government’s hydrocarbon contracts, noting that the royalty rate charged in Colombia and other neighboring countries ranges from between 8 percent and 20 percent, whereas in Peru it is 20 percent or higher.

 

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