Peru looks to encourage oil sector investment

In recent days, the Peruvian press has published a series of articles focusing on the embattled Peruvian oil industry. At the 2016 Peru Energy conference, El Comercio spoke with Diego Lozada, an oil sector export and former member of the board of Peruvian state oil company Perú-Petro.

Lozada argued that, given competition from neighboring Colombia, Peru needs to provide additional incentives to encourage oil sector investment. He added, “Only in Perú do they charge up to 60% in royalties, this makes any project unviable. In the case of Colombia, they charge a royalty of just 8% and then raise it depending on production volume.” Any observer of the Colombian oil industry knows that it too has struggled to attract investment in the last year. This race to the bottom in a desperate attempt to drum up interest in new projects will not help either country.

According to an EY 2016/2017 guide to investing in Peru’s oil and gas sector, hydrocarbon investments in the country have been undermined not just by the global collapse in oil prices, but also by internal problems. Beatriz de la Vega, an oil and gas expert with EY, blamed social conflicts, delays in environmental licenses, and other bureaucratic processes for the decline in investment.

Undaunted by the turbulence in the oil market, Perú-Petro president Rafael Zolger told the press that the company plans to auction off a package of 32 oil blocks later this year. He explained that, based on feedback from interested oil companies, the auction will occur in the second of the year, once Peru’s presidential election concludes.

Lastly, the Peruvian environmental regulatory body sent a team of specialists to investigate a reported oil spell in Loreto, in the Peruvian Amazon. The specialists are trying to determine both what caused the spill and the scope of the environmental damage it has caused. All that is known is that the spill happened a week ago because of a leak in the North Peruvian oil Pipeline.