Petroperú: between privatization and a comprehensive restructuring

“A Technical Directory, even if it is not 100% state-owned”

Antar Bisetti, former Vice Minister of Hydrocarbons

The new governance model for Petroperú definitely has to be a technical administration, and by “technical” we understand all levels without political interference, regardless of whether the company is 100% state-owned or not.

Law 30130 authorizes selling up to 49% of shares, which is very complicated because not even Ecopetrol with its size and returns has been able to reach 15%, but that’s okay, it is an effort that must be made.

In any case, first the oil company must be made solvent, present positive numbers, and the shareholding can be disseminated in its real value.

We oil workers have taken the announcement of the new Board very badly, because it was very confusing and typical of a sector that only thinks about privatizing Petroperú at any cost, without thinking about the consequences and without knowing how to really do it by law. After that, and for their own dignity, the directors should resign.

In its 54 years, there have been no more than four petroleum engineers at the head of the company, two in the beginning, which was the best time, and two in the last two years.

The best year of the last ten has been that of engineer Pedro Chira. He was lost, but much less than the previous ones, and he was on his way to finding the solution with an EBITDA that in the first quarter of 2024 was positive, but they don’t want to understand it.

“Meritocracy and autonomy for good governance”

Humberto Campodónico, former president of Petroperú

Good governance begins with the meritocratic election and autonomy of the board – avoiding all political interference. Today directors are elected and removed by shareholders without giving cause. Another legal framework is needed.

The private management proposal is ideological, not technical. It is based on the assumption that only private management is good. That has no basis. The World Bank in 2023 stated that public companies bill US$45 billion a year, 50% of the world’s GDP and makes no difference to private companies that, in some cases, have poor management.

The NRT problems are due to the delay in its start-up due to technical problems. Any additional delay will continue to generate losses, serious problems for the Treasury and great reputational loss. Once resolved, it will allow you to pay your debts with international creditors.

Short-term debt must be restructured.

Petroperú must return to the exploitation of lots, such as Lot X, which will give it the income that it does not have today. The pipeline must go to Perupetro.

Private participation in its shareholding is needed, as is the case today with Ecopetrol and Petrobrás.

There is no consensus on the role of Petroperú. But a sector thinks that it should not exist and the incomplete privatization of 1993 must be completed.

“Independent business units for Petroperú”

Carlos Gonzales, director of Enerconsult

It is clear that there will be no privatization or transfer of ownership to private parties. It would be crazy to sell Petroperú at this time, it would be a bargain knowing that there may be an economic recovery in the future.

When we talk about private management, we talk about looking for a firm or group of specialists in the management of companies in crisis.

The most advisable thing is to divide Petroperú into business units, as happened in Ecuador: Petroperú-Production, Petroperú-Refinery, and Petroperú-Oilduct, as three independent units.

This division would allow the Pipeline to be concessioned – not sold – since the company should not get rid of it. The concessionaire would be responsible for the investments so that it is buried, modernized and adapted to the regulations of DS 081-2007, which regulates the Transportation of Hydrocarbons by Pipeline. The asset is not adequate and waiting for Petroperú to do it is a dream.

Petroperú-production would see, for example, the partnership of Lot X with a private company and, eventually, other lots to be developed, such as 192 and 64.

This Petroperú without debts or liabilities could obtain financing to accompany the partners in the development of the wells. But today’s Petroperú, integrated, cannot take a loan of US$20 million to drill, because it has losses.

“Selling Petroperú shares is very difficult today”

Arturo Vásquez Cordano, Gerens Research Director

A management committee can be established by hiring a company specialized in restructuring with a mandate period. That is done quite a bit in the sector. There are several companies that are responsible for carrying out ongoing restructuring, although it may be less convenient in the highly politicized environment that exists, because the Government could terminate the contract with the contracting company.

The other alternative is to establish a meeting of creditors. The State declares the insolvency of Petroperú – which is what it eventually has, according to its Financial Statements –, it goes to a protection process through a bankruptcy of creditors, where the State would also be because the MEF is owed several billions of dollars, and the creditors would have to establish a board that would guarantee total private management, because the bankruptcy law would allow the establishment of a temporary administrator who would be in charge of restructuring the company.

Selling shares is very difficult because today the company has a negative value, its debt is almost four times its equity. According to Arthur D. Little, the value of the company is -US$2.2 billion, we would have to pay someone to take it.

Fact

The Government only has until today, Sunday, May 19, to publish the decree that authorizes the entry of Petroperú and its private partner De Jong Capital to Lot X of Talara, the most important in northwest Peru.