BPZ lists provisions for commercializing stranded gas off NW Peru

Jan. 24, 2005
The main objective of BPZ Energy Inc.'s initial project in northwestern Peru is to develop natural gas reserves that until now had been overlooked and treated as "stranded" gas, because it had no commercial market.

The main objective of BPZ Energy Inc.'s initial project in northwestern Peru is to develop natural gas reserves that until now had been overlooked and treated as "stranded" gas, because it had no commercial market.

This will involve using the dry gas for power generation, to be generated by BPZ. The project will take advantage of the following existing conditions:

1. Newly identified and certified reserves of gas that had been discovered in the early 1970s with a very large upside potential.

2. Two usable offshore platforms with one gas-productive well each.

3. Substantial demand for electric power in Peru and Ecuador.

4. Multiple markets nearby for gas to be used in power generation.

Financial and political risks are minimal because of provisions included in the license contracts signed by BPZ with Perupetro, such as the following:

1. Free use and ownership of all hydrocarbons produced.

2. Contractual and legal provisions in force at the time of contract signing are guaranteed to remain valid throughout the life of the contract.

3. No export duties on exports of hydrocarbons.

4. Free use and ownership of any foreign currency, with unrestricted exchange of Peruvian currency into another currency, and vice versa (currency conversions are to be done at a banking institution in Peru).

5. Unrestricted transfer of funds (in Peruvian currency or in a foreign currency) from Peru to another country. Revenues from domestic or export sales can be banked in Peru and/or overseas.

6. No taxes on repatriation of earnings.

7 .Accounting books can be kept in US dollars

8. Taxes paid in Peru are recognized by the US.

Major expansions of the program described in these pages would depend on:

  • Development of several structures where gas and/or oil was also discovered, but not adequately evaluated.
  • Future gas and/or oil discoveries in ten additional prospective seismic structures not yet drilled in Blocks Z-1 and XIX.
  • Further expansion of the gas and power markets in Peru and Ecuador, which have been showing growth at 3.5%/year.
  • The market for the area's light, sulfur-free oils will continue strong for the foreseeable future.

Meanwhile, BPZ Energy will also work its other blocks (Area VI and XVI) in Northwest Peru and Block 2 in southwestern Ecuador, where the company has a participating interest.