PRIVATIZATION SPURS SPENDING IN PERU

Foreign investment action is heating in Peru as that country's petroleum privatization push gets under full swing.

A unit of Maple Resources Corp., Dallas, has undertaken a $150 million integrated energy development project in Peru.

If all goes as agreed, Maple Gas Corp. del Peru Ltd. by yearend 1995 will become the first private company to produce and sell nonassociated gas, refined products, and electricity in Peru.

Under separate contracts, Maple last month was to take over operation of two central jungle oil fields, Maquia and Agua Caliente, and begin developing a sizable undeveloped gas field, Aguaytia, also in the central jungle.

Meanwhile, Occidental Petroleum Corp. expects to take over operations of state owned Petroleos del Peru's (Petroperu) northern coast Block VI this month once it has signed a development and production contract with new petroleum regulatory agency Petroperu SA.

Peru's crude oil production in March averaged 128,500 b/d, up from 118,800 b/d in March 1993.

MAPLE'S CONTRACTS

Maple's contracts are the first signed under Peru's new hydrocarbons law, which took effect Nov. 22, 1993. It is intended to privatize petroleum operations and boost oil and gas production (OGJ, Dec. 13, 1993, p. 66).

Maple's Aguaytia project is covered by three long term agreements with Perupetro, the state agency formed under Peru's new hydrocarbon law to negotiate and administer oil and gas deals with private companies. The project entails a 30 year operating contract.

Mobil Oil Corp. discovered Aguaytia in 1961 in association with Cia. Petroleros El Oriente, a combine of Peruvian and German investors, but never developed the field.

Separately, Maple has a 20 year operating contract covering Maquia and Agua Caliente, which Petroperu operated. The two oil fields, discovered in the late 1960s, last year produced a combined 800 b/d.

In addition, Maple signed with Petroperu a 20 year rental contract for a 3,250 b/d refinery and fuel sales facilities at Pucallpa on the Ucayali River about 480 km north of Lima.

Maple won the contracts in an international tender Mar. 14, 1993, but negotiations dragged on for more than a year partly because of changes in Peru's hydrocarbons law. Under the new law, Perupetro assumed Petroperu's responsibilities as the government entity promoting and supervising oil and gas contracts.

MAPLE PROJECT FIRSTS

Rex W. Canon, Maple executive vice president, said the Aguaytia project will mark the first time:

A nonassociated gas field has been developed in Peru. There is some associated gas production in the country.
A private company has operated a refinery in Peru and sold refined products to the domestic market. Other oil producers in Peru sell crude to the government to be refined and marketed.
A private company has built a plant to generate and sell electricity for Peru's power grid. Power plants in Peru are either government owned and operated or were built by private companies strictly for private use.

AGUAYTIA PROJECT

Maple agreed to a 2 year minimum work program under the two license contracts covering two jungle blocks, with work to occur in three phases:

Further development of Maquia and Agua Caliente oil fields and testing of two shut in wells in Aguaytia gas field. Additional work calls for 18 workovers, drilling three development wells, and conducting a 3D seismic survey.
Development of Aguaytia gas field infrastructure, which includes construction of a gas processing plant, laying of natural gas and natural gas liquids pipelines, and construction of NGL fractionation and liquefied petroleum gas storage facilities.
Development of a power plant project in the region, subsequent to Maple drilling another gas well at Aguaytia, along with construction of more gas processing and LPG storage capacity, construction of a 140,000 kw power plant, and laying a gas pipeline to the power plant.

MAPLE PROJECT DETAILS

Canon said the license contracts essentially are concession agreements that allow exploitation of hydrocarbons on the three blocks. Maple will own all hydrocarbons produced and pay a royalty to Perupetro.

A 20 year license with an optional 10 year extension covers Blocks 31B and 31D. A 30 year contract with an optional 10 year extension covers Block 31C.

Block 31B is a 154,456 acre tract that includes Maquia oil field, where 26 wells produce 450 500 b/d of 37 gravity oil from Cretaceous Vivian and Cahiyacu formations at about 2,100-2,200 ft. Maquia oil lies in a 4.3 mile by 2.4 mile anticline.

Block 31D is a 21,127 acre tract that includes Agua Caliente field, where 11 wells produce about 150 b/d of 44 gravity oil from Cretaceous Cushabatay and Raya formations at about 1,350 ft. Agua Caliente is a 7.5 mile by 4.6 mile anticline.

Block 31C is a 41,093 acre tract that includes Aguaytia field, a 7.8 mile by 1.1 mile Cushabatay anticline at about 8,300 ft, about 80 km west of Pucallpa near the town of Zorillos.

Mobil discovered gas on Block 31C in 1961 with its 1 X Aguaytia wildcat and in 1967 drilled the 2 X confirmation well. But the field was not developed for lack of markets, and in 1972 the concession reverted to Petroperu.

Petroperu in 1974 shot 119 miles of 2D seismic on Block 31C. After tests of the 1 X and 2 X wells, Petroperu in 1986 drilled the 3 X as a replacement for 1 X.

AGUAYTIA PHASE 1

Maple during the first phase of its Aguaytia project is to:

Increase production from Maquia on Block 31B and Agua Caliente on Block 31D by working over nine wells in each field and drilling one development well in Maquia and two in Agua Caliente.
Test 2 X and 3 X wells in Aguaytia gas field on Block 31C to confirm hole integrity and well deliverability.
Acquire 3D seismic data in Agua Caliente field.

Canon says the workovers and new wells are expected to increase Maquia and Agua Caliente production to more than 2,000 b/d.

The two wells to be tested in Aguaytia field appear able to produce about 30 MMcfd of gas. Maple estimates Aguaytia proved reserves at 302 bcf of gas and 22 million bbl of NGL.

Old 2D seismic data indicate structure underlying Agua Caliente at about 5,000 ft. Depending on results from 3D seismic data and workovers, Maple could drill an exploratory well in Agua Caliente in Phase 1.

Deeper reserves also are possible in Aguaytia field.

To fulfill the 2 year work program required by its licenses, Maple plans to complete Phase 1 workovers, drilling, and testing in 6 12 months. Phases 2 and 3 are expected to require another 12 14 months. Maple's Agua Caliente 3D seismic work must be finished within the 2 year term of the work commitment.

PHASE 2

During Phase 2, Maple is to:

Install in Aguaytia field a 15 20 MMcfd gas processing plant and compression facilities to reinject excess gas into the reservoir.
Lay two pipelines from Aguaytia east about 90 km to Pucallpa, a 6 1/2 in. line for gas and a 4 1/2 in. line for about 1,000 b/d of an NGL mix.
Build fractionation units at the Pucallpa refinery, to strip propane, butane, and natural gasoline from Aguaytia NGL.
Construct propane and butane storage of undetermined volumes at Pucallpa.

Maple is to use a pipeline from Agua Caliente and a pipeline and barge facilities from Maquia to transport oil produced in those two fields to the Pucallpa refinery and sales plants.

In Aguaytia, Maple will produce gas from one well, process it in the field, transport enough dry gas to Pucallpa to serve the local 3 6 MMcfd market, and reinject excess residue gas into the reservoir through one of the other wells.

The company will transport all liquids stripped from gas produced in Aguaytia field to the fractionator at Pucalipa. NGL is to be sent via pipeline to the Pucallpa refiners, as feedstock, mostly to produce gasoline and kerosine. Canon says transportation exists for Maple to serve mostly distant liquids markets around Lima, where there is an immediate demand for propane and butane.

Maple is to develop local markets around Pucallpa for natural gas and NGL.

PHASE 3

In Phase 3 of its project, Maple is to dedicate excess Aguaytia gas production to help solve Peru's seasonal electrical power shortages. The company, plans to:

Drill one more gas well in Aguaytia field to assure plenty of gas deliverability.
Build another 15 20 MMcfd gas processing plant in Aguaytia field to process the added gas production, also essentially doubling NGL produced, stripped, and shipped to Pucallpa.
Lay about a 100 km, 12 3/4 in. gas pipeline southwest from Aguaytia field to a gas fired power plant to be built near the towns of Tingo Maria and Aguaytia.

Maple intends to tie the Aguaytia power plant into Peru's main power grid, the Center North Interconnected System (CNIS), at Tingo Maria.

Canon said most of the power available on CNIS, which serves Lima and most of Peru's industrial areas, is generated by hydroelectric plants, which must have adequate rainfall to function properly. In the past, long droughts have caused severe power shortages for residential, commercial, and industrial customers. Lack of reliable power supply is blunting economic growth and causing many businesses in Peru to operate less than full time.

Maple's Aguaytia project will increase Peru's capacity for nonhydropower electricity leaving it less dependent on weather. In addition, electricity from Maple's new power plant is expected to be the cheapest source of thermal energy for electricity generation in Peru.

"Our plan is to bring all these facilities on line by fourth quarter 1995," Canon said.

OXY'S WINNING BID

Perupetro confirmed Oxy was awarded a service contract for Block VI a week after it disclosed the four qualifying bid groups in the tender.

Oxy outbid Sapet Development Peru Inc., a unit of China's state owned China National Petroleum Co.; a combine of Mexpetro SA de CV, Mexico City, and GMP SA, Lima; and Cia. Naviera Perez Companc, Buenos Aires.

Under the contract, the winning bidder must increase oil production from the block, currently operated bx Petroperu, from 2,000 b/d by drilling at least 30 wells the first 3 years and implementing a waterflood.

Industry sources in Peru estimate combined cost of the infill and waterflood programs at $35 million.

For the past 15 years, Oxy has operated a waterflood in Petroperu fields near Talara in association with Bridas Exploracion y Produccion, Buenos Aires. Oxy Bridas currently produces 4,800 b/d there.

In addition, Oxy produces an average 60,000 b/d from northern jungle Block 1 AB and is exploring northern jungle Block 4.