Congress against the return of Petroperú to lots in Talara

This week the Energy and Mines Commission will resume the discussion about the convenience of extending oil contracts to current licensees.

According to Bill 804/2021-CR, presented on November 19 by Carlos Alva, president of the commission, it is proposed to standardize oil and gas contracts.

Thus, the oil contracts that today are for 30 years will be extended up to 40 years, that is, 10 additional years. Although this change applies to new contracts, the document contains a single provision that allows current lot operators to take advantage.

The initiative, in its first complementary provision, is clear in recognizing that it will directly benefit 8 contracts, 7 of them located in Piura, whose contracts expire in the coming years.

These contracts expire between May 2023 and May 2028 and are for operations in Lot V (Unna), VII/VI (Sapet), Z-2B (Savia), X (CNPC), II (Petromont) and XV (Petromount). Block I contract expired in December 2021 and was awarded to Petroperú.

It is precisely the participation of the state oil company in these contracts that has changed from the initial proposal of the commission, until the last text that was about to be approved two weeks ago.

And it is that the initial bill in the Second Final Complementary Provision indicates that the extension will be given to the contractors if they offer Petroperú 25%.

Then, when a first prediction is made, it is stated that after the new contract is signed, the contractor must -within the following five business days- propose to Petroperú its incorporation into the contract as a participating partner, according to the percentages of participation that they agree on.

However, in the second prediction, the state company is no longer mentioned and the reasons why its participation is no longer convenient are not explained.

suspicious omission

For the former president of Petroperú Humberto Campodónico, it is not understood why Petroperú has been excluded in the last prediction, even more so if in the recitals of the opinion it is clearly established that the Talara refinery, owned by the state company, is going to need that oil .

”With this exclusion, consciously or unconsciously, what is being said is that a strong state company is not wanted.

The president of the commission would have to explain to the other congressmen and to the nation the reason for that change. It seems that the pressure of the lobbies has had an effect”, questioned the expert

.Congresswoman Francis Paredes Castro, titular member of the commission, commented to La República that the initiative has not yet prospered because it contains legal loopholes and the inclusion of Petroperú will be requested in this week’s session.

”(Petroperú) has not been considered in this process and we are waiting for it to be corrected. We point out that the country must recover our sovereignty and why not invest in our national companies”, stressed the legislator from Peru Libre.

It is important to note that in this commission 5 of its regular members are part of the government caucus. In this sense, since the beginning of his mandate, Pedro Castillo has expressed the political decision to strengthen Petroperú in all the links of the chain, including exploitation.

The commission is also made up of 4 members of Fuerza Popular and two of them, congressmen Cruz María Zeta Chunga and César Revilla Villanueva, represent the Piura region.

In 2015, this bench unanimously supported Petroperú’s return to oil exploitation, through the law that granted it Lot 192 (Law 30357).

actual strengthening

For Enrique Bisetti, a specialist with extensive experience in the energy sector, although Petroperú is not in a position to receive all the contracts that end in the coming years, it should be given the option to enter any of these operations, but according to his own evaluation.

”It has to be technically and economically viable for Petroperú and that it has the power to decide with which investor it enters. The law should give him the option for Petroperú to decide”, he recommended.

Regarding the percentage of participation, Bisetti suggests that it be between 45% and 49% and not limit it to 25%, a level that he considers “does not move the needle for anyone.”

Likewise, the specialist highlighted that within the package of lots to expire, lots X and the offshore platforms in Lot Z-2B would be more convenient for Petroperú. “Those two batches would be good and would easily add up to 15,000 to 20,000 barrels.”

He noted that Petroperú’s goal in about 10 years should be to have a production of 35,000 barrels per day, which includes lots 192, 64, 8 and lots X and Z-2B. “That volume does move the needle for Petroperú for the operation of the new Talara refinery,” he stressed.

In the opinion of other specialists, Lot VII/VI (Chinese state-owned like Lot X) would also be useful for Petroperú.

Oil income factor

Every oil company needs vertical integration, that is, to participate in all the links of the chain, especially in exploitation, explained Humberto Campodónico.

In this sense, he explained that if Petroperú enters the most important oil lots in Talara, it would access not only some 20,000 barrels per day, but also oil rent, which is the difference between the production cost of US$20 per barrel and the international price of US$ 80.

This would help the cash flow that Petroperú needs for its activities, in particular to meet the payment of loans and bonds for the new Talara refinery, amounting to US$170 million in 2022.

”The fact that the state company has priority in the granting of oil lots that expire is a common practice in the oil industry throughout the world. This would be one of the few cases in which the state company is excluded and the Talara lots that expire in the next 2 years are extended by finger,” Campodonico criticized.

It is not yet clear if there will be a reduction in royalties

A central aspect that the Energy and Mines Commission must define is whether there will be a reduction in the payment of royalties in future contract extensions contemplated in this law, as recommended by some of the opinions requested by the commission.

This issue is of special interest to the Ministry of Economy and Finance (MEF) to the extent that it objects that the royalty should not be less than the canon, since this difference would have to be assumed by the Public Treasury.

The Energy and Mines Commission indicates that Perupetro has a favorable opinion regarding the prediction, however, sources from the state agency commented to this medium that this opinion is about another passed bill. It was learned that Perupetro had already warned the commission chaired by Carlos Alva of this situation.

In this commission, Bill 679 of the Executive on the massification of natural gas is stalled, the same that since its presentation on November 10, 2021 has not been discussed. “There it is shown what the priorities of this commission are,” he asserted. Humberto Campodonico.