Minem targets gas royalties to promote petrochemicals

The Ministry of Energy and Mines (Minem) will seek to reduce gas royalties from shirt to obtain, in exchange, an energy price that makes the development of a petrochemical industry in Peru viable.

During the Gas Natural Perú 2023 event, the head of the General Directorate of Hydrocarbons, Luis García, said that several options are being considered to give added value to gas, but first, a renegotiation of the contracts with the producer would be considered.

“In the contract with Perupetro there is an option for the petrochemical company to have benefits on royaltiesin order to deliver a competitive gas to which an added value can be given”, he stated.

In this sense, García Cornejo ruled out that the reduction is applied to the royalty that is directed to the regions, but that it will point to the fraction of gas that would be destined for petrochemicals.

Natural gas from blocks 88 and 56 pays a 37.2% royalty on sales, in addition to the Income tax. Currently, there are four companies interested in developing an industry with natural gas: Enaex (Chile), Orica (Australia), Humboldt and a fourth firm, which would belong to the Bogotá Energy Group, according to specialists consulted at the event.

Petrochemistry. President Dina Boluarte proposed a petrochemical company that manufactures urea with natural gas. Photo: The Republic

Alejandro Fort, Exploration manager at one of the Camisea consortium companies, points out that a scheme similar to the one proposed years ago for another frustrated petrochemical company could be given, with a tiered royalty of between 12% and 20% according to European prices. of the urea.

“It is the fourth time that trying to make a petrochemical in Peru, but I think that on this occasion a clear message is being given with coherence by the Government,” said Fort.

The route to follow

Natural gas prices are regulated, so its value is competitive: it ranges from US$1.40 to US$2 per million BTU, while the US Henry Hub marker averages US$1.80.

For Eduardo Guevara, a specialist in energy from CMS Grauthis new pole should be developed in the Marcona area (Ica) where there are conditions to install a methane treatment plant, from the Contugás pipeline and thus overcome the required infrastructure gap.

At this point, he proposes that once the contract is defined by the petrochemical company, a Special Economic Zone (ZEE) be expedited from the Ministry of Economy and Finance, as occurs in other countries that produce synthetic fertilizers.

“When CF Industries wanted to do a petrochemical business, local prices were very competitive. But when Shale Gas technology arrives, industrializing gas in the US became more attractive. That is why it is not enough to say there is gas here, ”he explains.

From the Peruvian Hydrocarbons Society (SPH), Felipe Cantuarias warns that you should also ensure a continuous flow of gas for the petrochemical investor. The problem is that the Camisea contracts would end before the 25 or 30 years that it would take to recover that investment. For this reason, he does not rule out seeking to renew them.

“A plant of this type is valued at US$2,000 million. We are looking for gas to become the energy that ensures the economic competitiveness of the country”, says Cantuarias.

The word

Luis García Cornejo, General Director of DGH

“They are elements that the State uses to promote the industry; they are on the table. We are talking with the companies, but there are still issues to resolve in order to give them the facilities they need”.

The petrochemical route in Peru