Contracting in Peru Evolution
The goal that PERUPETRO laid five years ago, as part of an innovative scheme in the oil contracting, is being achieved in spades. We will reach 100 contracts for hydrocarbons exploration and exploitation, a record in the oil history of Peru, and will ratify the country’s potential and investors confidence.
This is not about a figure, but also the enormous opportunities that will generate the intensive exploration in the country, and is sure that in the coming years we will see more oil and gas discoveries, that will increase the country’s reserve level.
Investors confidence is an important bastion in this achievement. Over the past five years, the Hydrocarbons Sub Sector has received 5,300 billion dollar, an amount that is estimated to double in the next five years for further exploration and resource extraction.
This innovative oil contracting scheme started in 2007, passing from direct negotiation to the bidding process, which helped to generate a strong competition between the concerned oil companies.
Thus by mid 2006 PERUPETRO technicians began to prepare the Peru Round, which included 19 blocks, of which 13 were awarded in July 2007.
This process generated that the minimum level of royalties rose from 5% to 26% on average, only by competition effects among the companies that participated in the bidding.
With these excellent results, PERUPETRO enlisted a new bidding process for 2008, in which more than 40 companies were interested in obtaining the license of any of these areas.
In September 2008, was awarded the bid of 17 blocks and the minimum royalties rose to 32% on average.
For 2010, PERUPETRO imposed a higher fence and set more stringent basis, so that larger companies involved in the process, in search for the greatest good for the country.
That left out of the race junior companies, leading to medium and large companies competing for one or more of the 25 blocks included in this new contract.
In May was launched the Bidding Round 2010 and, amid a still troubled economy, there was a successful promotion campaign in several countries, attended the major oil companies.
The results were satisfactory, 27 companies qualified to participate attracted by the strength of a strong company, thriving, with clear and stable rules.
From the 25 blocks offered, 14 were awarded to important consortia that joined for this process, among them, Repsol-YPF-ECOPETROL, that won the bid for five blocks and which is one of the partnerships with the best expectations in the country, due to their experience and quality standards that apply in different countries where they operate.
The dynamism of the Hydrocarbon Sub Sector has taken in recent years, has generated 4,300 billion Dollars in revenues for the State, due to the royalties paid by the contractors, while the concepts of fee and overfee, the regional and local governments had received 6,000 billion Nuevos Soles.
NEW BOOM IS COMING
PERUPETRO has been the architect of the arrival of 60 oil companies in recent years, including: Talisman, Reliance, Korea National Corporation, SK, Perenco, Burlington, PetroVietnam, Repsol, Cepsa, Inpex and Ecopetrol.
Attracting venture capital is a complex and titanic process, even considering that other countries in the region are involved in similar processes of licensing, as in the case of Colombia, which recently completed its Open Round 2010.
Brazil is also ready for this year, its 11th areas tender, by the National Petroleum Agency, while Ecuador is preparing a new bidding process for 10 oil blocks located in the south east of the Amazon.
As a result, Peru has to compete with countries with large oil potential, not an easy task, but the country has been doing a good start so far.
With a current production of 158 thousand barrels per day of liquid hydrocarbons, Peru aims to reverse the deficit in oil trade balance and becomes a net oil exporter from 2013, period that will begin the commercial operation of the block 67, by Perenco.
In the following years the hydrocarbons production in blocks where large investments are run today will increase, so we believe that the new boom in the Hydrocarbons Sub Sector is coming.