What should the Government do with Lot X?

“The interests of the State must be prioritized”

Humberto Campodónico, Former President of Petroperú

The privatization of the 90s left Petroperú without two of the three sources of income: one, the income from the production of Petroleum and, two, the sale of fuel at the taps. PetroPeru became RefinePeru. And since the Refinery was closed in January 2020 to build the new one, it became ImporterPeru, losing the refining margin.

That lasted until the end of 2023 and caused the losses we have seen. But with the new refinery at 100%, there will be a large refining margin, due to its technical characteristics (it is not a white elephant) that will cover the payment of its debt. The difficult thing – and it causes enormous reputational damage – is to cover the current economic downturn.

Lot X that reverts to the State is in production, generates margins for investments and increases payment capacity. This is what Arthur D. Little and Columbus propose, technically. And also, that the Good Corporate Governanceto banish the errors of August 2021.

The State must align its policies. Petroperú buys all the oil from Talara for the refinery. It is one thing to do it at the production cost (with Lot X) and another to pay the international price to third parties, who will take the profit. It depends on the MEF, MEM and Perupetro prioritize the interests of the State, beyond the pro-privatisation campaigns.

“Award Lot X through public bidding”

María Julia Aybar Solís, President of the Hydrocarbon Sector Committee of the National Society of Mining, Petroleum and Energy-SNMPE

Given the expiration of the Lot X contract, it is urgent that the Government, through Perupetro, act with diligence and responsibility. The most advisable option is to award Lot X through a public tender for a period of 30 years. This measure will make it possible to take full advantage of the potential of this lot, which has proven developed reserves and contingent and prospective resources that require considerable investments for their development. This process will in turn allow the State establish the conditions that the future contractor must meet to maintain the best profitability of this asset for the benefit of the country. This has been evidenced by the result of the bidding processes that were carried out in 2023 regarding Lot V and VII, which concluded with ambitious work programs and a significant investment in the exploration and exploitation of hydrocarbons.

In the event that more time is required to make the tenderan alternative could be to do an extension of a couple of months with the current operator of the Lot until the bidding process concludes.

“Private investment where the State does not reach”

Carlos Vives, Former President of Petroperú

The first thing to say: the private investor, who in hydrocarbon exploration and exploitation activities constitutes a pillar of development, must be unrestrictedly respected. However, the investment has to be where the resources of the State They should not arrive because they are high risk, in the case of jungle and offshore areas, which are unexplored and that is where important private investment must be present; lots 192 and 64 in northern jungle; lot Z-69 offshore.

The case of areas on land in the north of the country is different because they are highly explored and exploited, more than 100 years of extraction, which infers that the risk is minimized. These operations are continuous and by monetizing production the necessary resources are obtained to cover expenses and investments.. It is necessary to take into account the following example: lot X, period 2000-2023, only one exploratory well was drilled with negative results; did not increase reserves, but in that same period approximately 100 million barrels of oil were extracted for the benefit of the contractor.

Finally, it is up to Perupetro to determine the fate of these areas, ensuring the country’s energy security.

“Investments in Lot X should not stop”

Carlos Gonzales, Managing Director of Enerconsult

Between 1994 and 2023, 1,428 development wells have been drilled in Lot X, producing 138 million barrels of oil; Already in December 2022, it registers proven reserves of 44 million barrels and contingent and prospective resources (2C and 2U) of 46 million barrels. Between 2017 and 2019, the current contractor has drilled an average of 107 wells per year. In summary, Lot X will continue to be the most important in the northwest as long as investments do not stop.

To encourage maximum recovery of reserves in Lot and the worst, allocating it by hand without technical and economic criteria.

If due to lack of time it is unavoidable to award the lot under a temporary two-year contract, to prepare a tenderthis must be the result of a competitive process by number of reconditionings.

Finally, The economic qualification of those interested in Lot X must be done based on their solvency and not based on their assets, Even worse if that equity corresponds to assets that cannot be converted into cash (liquidity) to meet its obligations.

Fact

• The consulting firms Arthur D. Little and Columbus, hired in compliance with DU No. 023-2022 of Petroperú restructuring, recommend that the state company participate with 100% in Lot X.