Talara: US$5.9 billion oil reserves seeking to be reprivatized

With the delivery, by Petroperú, of the letters of interest to operate 100% blocks I, VI and Z-2B of Talara, a new stage begins for the hydrocarbons industry that could end, according to various specialists in the sector, with 30 years of harmful contracts for the Peruvian State, in which not only did progress not be made with the promises of finding more oil and bringing about social development, but also in which a business model based on depleting reserves scorned as “marginal” at the time of its privatization.

The delivery of the letters comes as a corollary to Dina Boluarte’s presidential promise to guarantee the return of the state company to these three batches, made last February, during her visit to the New Talara Refinery (NRT). Added to this is the position of the Ministry of Energy and Mines (Minem) to grant 100% operation of Lot X.

For various specialists in the sector, the campaign promise must be vindicated in the next message to the nation, on the days that the contracts for these four deposits expire, which occupy more than 80% of Talara’s production.

“There is no reason for those contracts to be renewed in the hands of the private sector. 30 years have passed in which none of the objectives were met, and on the contrary, they are returning wells with a lower production than those delivered to them at zero risk cost, since they did not have to explore them,” says Aurelio Ochoa Alencastre, an energy specialist.

A confirmation already made by Isabel Tafur Marincurrent president of Perupetro —the state agency responsible for managing, promoting, and negotiating oil and gas contracts in our country—, who clarified that Petroperú does have the credentials to enter the zone as an economic subject, by virtue of its residual net worth of US$1.9 billion, which would even allow it to enter Block X together with a comprehensive oil services company (today operated by the Chinese CNPC).

“Yes, Petroperú will enter Block X, but we still do not have the entire scenario evaluated. In September (after the decision on lots I, VI and Z-2B) we will begin with the evaluations”, Tafur Marín guaranteed for La República.

Precisely, it is a key week for Perupetro, because as reported a few weeks ago, the response to Petroperú’s letter of interest should be ready by the end of July, with a view to starting the reversal before next October 21, the date on which the papers for Lot VI/VII expire (now in the hands of Sapet, a subsidiary of CNPC, but which will be divided) and Block I (whose temporary contract will be renewed for two more years for the state oil company).

northwestern oils

These are proven reserves of around 85 million barrels of oil, with a potential value of almost US$5.9 billion (the estimate takes into account blocks VI, VII, Z-2B and X), at an average price of US$70 per barrel, which is at stake in the four fields, according to a report by researcher Jorge Manco Zaconetti. The West Texas Intermediate (WTI) marker closed last week at US$77.07.

The proposal of the Ministry of Energy and Mines (Minem) is a direct negotiation, like the one previously enjoyed by various private companies to take over Block 8 (Petrotal) and Block 56 (Hunt Oil). It is a prerogative of Perupetro contained in the Organic Hydrocarbon Law (LOH).

“As a company, we are prepared to participate in the operation of these batches and integrate them into our refining complex. They are fields that have positive cash flow”, Pedro Chira, president of the Petroperú Board of Directors, previously stated.

And it is that Petroperú expects to generate, annually, a positive ebitda of US$135 million over the next decade with its return to the upstream in these three lots of Talara, according to preliminary figures to which this newspaper had access.

UNI professor Alexei Huerta points out, however, that after the presentation of the letter of interest, an emergency decree is still needed from the Executive that authorizes direct negotiation between Perupetro and Petroperú.

“Both must be waiting for the decree to come out to start the negotiation. It would be the ideal mechanism, the fastest, since the other would be a law of Congress, which would take longer because the legislature is suspended, ”he argues.

Ochoa Alencastre questions, along these lines, that the high prices of international crude oil throughout three decades of privatization have not been enough for the surrounding populations in the area of ​​influence in Piura to have access to drinking water up to now.

Instead, it refers to the development figures for the hydrocarbons sector have been “inflated” all this time, but adding the contribution of Camisea gas to “hide” the meager oil development in the basin.

guaranteed production

The production of the Talara fields, according to Gustavo Navarro, former director of the General Directorate of Hydrocarbons (DGH), could be perfectly assumed by Petroperú, since it would only have to absorb the technical personnel that operates there, as happened with Block I, already commissioned in December 2021.

In the 1990s, he explains, Perupetro called for tenders for small lots to promote the national oil industry to allow the entry of national and international private capital. Among those that survived are Graña y Montero (GMP) and Monterrico, which just won Lot V. Those companies had no experience in oil activities, but they were successful because the staff stayed.

“Unlike that process, today Petroperú has personnel with extensive experience in its Exploration and Production Management. Pedro Chira himself is a very knowledgeable man on the subject and has staff with great experience. They would be the ones directing his return to Talara”, emphasizes Navarro.

Petroperú and a reversal resisted for 30 years

Block VII, tied to Block VI for now, is already in the hands of Olympic, after Perupetro awarded it two weeks ago. The other field, Block V, will remain in the hands of Petromont. After these first two reprivatized fields, the next on the list are those announced by the Peruvian government for Petroperú.

For the international firm Arthur D. Little, the New Talara Refinery (NRT) would generate an annual positive ebitda for Petroperú in the next 15 years of US$472 million. The external debt of the oil company today is US$347 million. But to ensure the profitability of the business, the lots must be operated.

Minem and Perupetro have guaranteed that, after the reversal of blocks I, VI and Z-2B (now converted into Z-69 to have larger exploration areas), Petroperú will also operate Block X, which occupies 70% of Talara’s production. According to Manco Zaconetti, its reserves are valued today at US$3,456 million.

The National Society of Mining, Oil and Energy (SNMPE) reported that Perupetro has also received letters of interest from various private companies to take over lots VI and Z-2B. According to information to which he accessed The Republicwould be two companies for each batch.

The farce of “free competition”

Approach. Humberto Campodónico, former president of Petroperú

They want to privatize the lots in Talara again under the pretext of “free competition”. They have proven reserves that revert to the State; and they have no risk because they are a going concern. They generate an ebitda of US$290 million per year, which finances the investments that are needed. It is not true that Petroperú does not have the resources to invest.

The total cost of production in the zone is US$40/barrel. And its price today is US$80 per barrel. Oil rent is US$40/barrel. But if it goes up to $150/barrel for something in the Middle East or Russia/Ukraine, the rent would be $110 a barrel. If Petroperú is in the lots (with partners in some of them), it will take advantage of it. But if not will have to buy at US$150/barrel, an oil that is ours. That is the rent that the neo-privatizers want.

Free competition is to seek new reserves, at risk, in the country’s basins. In Chile, under Pinochet, the 1980 Constitution prohibited Codelco from being privatized because “the rent belonged to Chile” and encouraged private investors to invest in new mines. Today, the 10 large private mines produce more copper than the state-owned Codelco, which maintained its large production. That is the lesson for Perupetro.

After 30 years, we now have a latent neo-privatization. Today they do not want Petroperú to have oil income, arguing “free competition”. Tomorrow they will come by the refinery. Is Perupetro’s setback also still latent?

figures

• Petroperú paid 12,866 million dollars for Talara oil since 1994.
• 25% of the crude that is refined in the New Talara Refinery is from the area.
• Petroperú would obtain 8,000 barrels per day from operating blocks I, VI and Z-2B.

reactions

Oscar Vera Gargurevich, Minister of Energy and Mines

“Perupetro is working on new contracts in which greater activity in the oil blocks is being privileged, in order to guarantee the increase in production and the increase in reserves.”

Isabel Tafur Marín, president of Perupetro

“Petroperú qualifies with the current regulations for Talara because it would participate as a qualified subject. We consider qualified subjects to be those who meet the technical, economic and legal conditions”.

Pedro Chira Mendez, President of Petroperu

“It would have a great impact on the economy of the company to have direct access and operate these fields. Before they were from Petroperú, and it is our wish now to increase their production over time”.