PERU DRIVING TO SUSTAIN OIL, GAS FLOW

Peru is pressing efforts to sustain its oil and gas production by seeking more participation by private foreign and domestic companies.

State owned Petroleos del Peru SA (Petroperu), grappling with severe cash shortages in a beleaguered economy, is offering more exploration acreage as well as participation in existing development/production programs to private companies.

Despite sizable potential seen by consultants, private company interest-notably among major multinational firms-seems to be limited. That may reflect concerns over disappointing exploration results and payment problems experienced by Occidental Petroleum Corp., responsible for about half of Peru's production.

Oxy is shifting its exploration focus in Peru. The company has asked Petroperu for authorization to switch its exploration campaign to Block 43 in Peru's south central jungle from Block 36 in the central jungle.

Meantime, Oxy has again halted payments to contractors in its northern jungle operations in Peru after Petroperu fell behind on payments for oil deliveries. Work continued and production remained stable, however.

Meanwhile, Petroperu has offered to international oil companies four new blocks in the Maranon basin of the northern jungle adjoining Peru's major area of production.

In addition, Petroperu has qualified seven groups or companies for secondary recovery and well workover programs in old fields along the northwest coasts.

OXY SWITCH

Oxy decided to pull out of Block 36 after reassessing results of a 3 year campaign there ending in 1989 with two dry holes and costs of more than $74 million.

Seismic surveys defined 20 prospective structures on the block.

Under terms of a contract signed with Petroperu in 1986, Oxy is required to spend $267 million through yearend 1991 in Peruvian jungle exploration. Included in that amount is spending for step-outs in Block 1AB, source of most of Oxy's Peruvian oil production, as well as for Block 36.

Under the agreement, Oxy could spend the balance in other areas if further drilling is not justified in Block 36.

Block 43 adjoins the undeveloped Camisea gas field.

PETROPERU PROBLEMS

Petroperu fell delinquent on payment to Oxy of $13.9 million for oil delivered in February and of $30 million in debt Petroperu refinanced at the beginning of the year.

Oxy boosted oil production to 58,000 b/d on its northern jungle Block 1 AB in late January after resuming field maintenance amid renewed negotiations with Petroperu (OGJ, Feb. 19, p. 28). Oxy had halted work twice in second half 1989, slicing its Peruvian production to as little as 29,800 b/d from 70,000 b/d, as a result of delinquencies or disputes in Petroperu's contract payments (OGJ, Dec. 25, 1989, p. 39; Oct. 30, 1989, p. 31).

As of mid-April, Oxy kept oil flow in the northern jungle at 66,800 b/d and at the Oxy-Bridas SA waterflood project in Talara field on the northern coast at 5,890 b/d.

In addition to its concerns over delays in payments, Oxy continues to press the government for changes in the way it is paid. Oxy wants at least part of its contract payments made at the free market dollar rate, currently more than double the official dollar rate it has been receiving.

Oxy also is reimbursed in official rate dollars from Peru's Central Reserve Bank for its imported field services and supplies but must pay for most local supplies and services in free market exchange rate dollars.

NEW BLOCKS

Petroperu carved the four new blocks-54, 55, 56, and 57-out of its Block 8.

The state company released more than half of the 16.9 million acre Block 8 last June. The blocks adjoin producing fields in Block 8 and in Block 1-AB, operated by Oxy under a service contract. Petroperu estimated oil reserves in the Maranon basin as of December 1988 at 190 million bbl proved and 607 million bbl probable.

Basin production by Petroperu and Oxy averaged 79,700 b/d in 1989. Peru produced an average 143,205 b/d last year.

Prior to the new block offering, a study for Petroperu by Robertson Research, Houston, defined 14 potential hydrocarbon bearing structures in Block 8 with a combined prospective resource of 400-800 million bbl of oil.

The study, financed by the Interamerican Development Bank, included data from a seismic survey by Seiscom Delta, a unit of Grant Norpac Inc., Houston.

An association of Petroperu supervisors in February called for immediate drilling on three structures, where Robertson pegged the combined prospective resource at 150-300 million bbl of oil.

The supervisors opposed negotiations then under way between Petroperu and Texas Crude Inc. (TCI), Houston, to subcontract part of Block to TCI for exploration and development.

Petroperu, citing its cash squeeze, said it could not afford an exploration and development program in the targeted area. It then chose to solicit bids from other foreign companies before signing any contracts.

COASTAL WORK

In a tender called at yearend 1989, Petroperu sought bids for secondary recovery work and workovers in La Brea and Hualcati oil fields and other fields in the Talara basin on the northwest coast.

More than 12,000 wells have been drilled in the Talara basin since before the turn of the century. About 3,000 of those have been abandoned.

Petroperu estimates combined proved and probable reserves in the basin at 392.8 million bbl of oil and 521 bcf of gas. It also cites possible reserves of about 866 million bbl of oil.

These companies or groups qualified for the work:

A combine of Cavelcas del Peru and Geopet Asociados SA, service companies based in Lima.
A combine of Zicsa, Contratistas Mineros, and Servicios Petroleros SA (Serpet). Parker Drilling Co., Tulsa, and several local service companies formed Serpet a few years ago.
Yuma Petroleum International Inc., Houston.
Grana y Montero Petrolera SA (GMP) and its parent Grana y Montero SA.
Buenaventra Ingenieros SA.
Vera Gutierrez SA Contratistas Generales.
Cia. Petrolera Rio Bravo SA, a recently formed domestic company.

Separately, only one company, Astra Cia. Argentina de Petroleo SA, Buenos Aires, has made an offer for exploration/development work in Areas B and C adjoining the Talara basin fields. There were no offers for Area A.

Petroperu has not disclosed awards.