Privatization of Peru's state petroleum company was to get off high center by early this month, having been sidetracked by the April presidential elections.
After months of delays, the sale of Petroleos del Peru SA (Petroperu)(20403 bytes) was postponed earlier this ear (OGJ, Jan. 16, p. 14) until after the elections, which saw Peru's incumbent President Alberto Fujimori reelected.
In June, Fujimori appointed Amado Yataco Minister of Energy and Mines, replacing Daniel Hokama, who resigned apparently for health reasons. Yataco, also serving as president of the privatization commission Copri, said a decision on the sale of Petroperu would be made quickly, perhaps by July 28, ahead of this report's presstime.
The uncertain status of Petroperu has not, however, slowed activity in Peru's petroleum sector.
Recent action includes:
- Petroperu plans to boost oil and gas spending this ear.
- Shell started negotiations with Perupetro this summer over development of the supergiant Camisea gas/condensate fields complex in the central southern jungle.
- Perupetro SA, the state regulatory oil agency, was expected to disclose this summer the winner of the tender for exploration and development of Block 52 south of Camisea natural gas fields.
- Maple Gas Corp., Dallas, is preparing to start phase two of its Aguaytia natural gas power project in the central jungle.
- Perupetro early this year sold its first shipments of Loreto crude to Conoco Inc. and Mobil Corp. for use at their Louisiana refineries after the agency took over oil marketing from Petroperu.
- Spain's Repsol SA and Australia's Ampolex Ltd. finalized an exploration and development license covering offshore Block Z-29.
- Quintana Minerals Corp., Houston, and YPF SA, Buenos Aires, expect to spend $65 million and drill nine exploratory wells the next 7 years on Block 50 in Per-u's northern jungle.
- Great Western Resources Ltd., Houston, let contract to Grant Geophysical, Houston, to shoot 748 line km of seismic on Block 65M in the Maranon basin of Peru's northern jungle. Great Western is operator in partnership with Enterprise Oil plc, London. Plans call for a second wildcat to spud by yearend. The Diana Mae wildcat, spudded in February, was dry.
- Prospective Block VI is up for grabs after Occidental Petroleum Corp. bowed out of negotiations with PeruPetro. Sapet Development Peru, a subsidiary of China's state owned China National Petroleum Corp., is first in line to take over 2,000 b/d of crude oil production on Block VI, currently operated by Petroperu. Sapet has been operating the Block VII north coast oil fields, with an average production of 830 b/d, since early 1994 after winning the block in an October 1993 tender.
PRIVATIZATION
In response to criticism over the proposed Petroperu sale President Fujimori promised during the campaign to hold a public debate for a consensus on exactly how the company should be sold.
Copri, the government's privatization commission, accepted until May 31 proposals from "citizens and institutions acquainted with the matter" on "the better development of Petroperu's privatization process and growth of the country's hydrocarbon sector."
Former Copri Pres. Daniel Hokama at the time said Copri will analyze the proposals this summer. Whether Petroperu should be sold as an integrated company or divided into units is still at issue. Hokama said if necessary, Copri would reconsider the privatization model it has already chosen for Petroperu.
An industry source said World Bank has encouraged Petroperu's plans to sell the company by business units and still favors that plan.
Some 30 international oil companies bought bid documents for a 600/y stake in Petroperu's 102,000 b/d La Pampilla refinery and the 62,000 b/d Talara refinery, sales terminals, northern jungle Block 8 fields, and north coast Block X oil fields. Copri said the refineries will probably be sold by the end of August.
PETROPERU BUDGET
Petroperu expects net profits to be $75 million this year compared with $184 million last year, due to higher costs, mainly finance charges, on an expected 17.5% devaluation of local currency against the dollar.
The company plans to boost oil capital spending this year to $112.2 million compared with $106.9 million last year.
Exploration and production spending will jump to $53.1 million from $43.1 million last year. Petroperu's exploration budget will fund 2D and 3D seismic surveys, reprocessing seismic lines, and geophysical, geological, and reservoir studies. The company also plans 20 development wells on north coast Block X and six development wells on northern jungle Block 8.
Meantime, the company plans to spend $23.9 million on maintenance and repairs to refineries. That compares with $9.9 million spent last year.
The company's biggest project this year is a $13.3 million investment to continue development of Chambira oil field on northern jungle Block 8.
Plans also include completing a liquids terminal and ballast plant at Talara for $1.8 million, financed with a $17 million Andean Development Corp. credit line.
The company has budgeted $4 million to continue evaluating development of a gas field off the north coast for possible construction of a gas fueled power plant at Tumbes. Plans this year include a market survey as well as feasibility and environmental impact studies
Petroperu expects to spend $1.5 million to finish work on the 2,000 b/d Marsella refinery, transferred from the Tigre River on jungle Block 1AB to pump station 7 on the north Peruvian pipeline near Bagua. The refinery started operating in April.
CAMISEA DEVELOPMENT
Cia. de Petroleo Shell del Peru confirmed the start of Camisea negotiations and disclosed an association agreement with Mobil Oil Corp. to take a 42.% interest in the venture.
Shell discovered the Camisea fields during a $200 million oil exploration campaign on Blocks 38 and 42 in the Ucayali basin during 1981-87.
The company at the time estimated Camisea reserves at 10.8 tcf of gas and 725 million bbl of condensate. However, negotiations with the government over a proposed $1.3 billion development project were canceled in August 1988 in a political decision by the Garcia administration.
Shell sees as the initial market for Camisea gas Peru's rapidly growing demand for low cost electric power that could be covered by gas fired power plants. The feasibility of this plan is based on the electricity strategy of the Ministry of Mines and Energy and Shell's own estimates. Peru's main source of electric power is hydro which generates electricity at a low cost but is unreliable because of Peru's spotty rainfall.
Perupetro Pres. Alberto Bruce said earlier that Shell has presented several alternative projects for developing the fields. One alternative, to transport the gas 4,000 km to Sao Paulo, has been put on a back burner because of the high cost and competition from other fuels. It could, however, be feasible in the long term, Shell said.
Bruce estimates the current cost of developing Camisea at $2.5 billion, including about $1.5 billion to transport the gas to Lima. The final cost will depend on the scope of development in later years after the gas reserves are quantified and the market established.
"Camisea is a world class reserve," Shell said. "It is very exciting, very big, and has very high priority."
Shell's study covers technical, commercial, and environmental aspects, including an environmental impact statement. Shell, recognizing Camisea is in an environmentally sensitive area, said it will work at least 50 km from Manu Park and has sought to maintain contact with the indigenous population.
For the past 16 months Shell has been working with a Perupetro team on a joint study of the feasibility of developing the fields and has been providing the team with reports as the study progressed. After final reports were to be submitted-under a May 31 deadline-the two companies were to have until yearend to hammer out an agreement.
CAMISEA AREA E&D
In parallel negotiations, Shell and Mobil have requested an exploration and development license for Block 75, which includes Shell's original Camisea Blocks 38 and 42 but without the Camisea fields.
A number of other companies are joining in the hunt for hydrocarbons in Peru's new hotspot, spurred by Camisea development and by E&D activity across the border in Bolivia. One industry official noted the huge volume of liquids in the Camisea fields and suggests more oil must exist nearby.
Mobil, which has completed a technical evaluation assessment of the Madre de Dios basin, also has asked Perupetro for an exploration and development license in the area in association with Elf Aquitaine, Exxon Corp., and Occidental Petroleum Corp.
Elf, in association with Eurocan (Bermuda), is seeking a license for acreage in the Ene basin, where Eurocan carried out a technical assessment of prospects west of Camisea.
The industry badly needs positive results in the southern jungle after disappointing results the past few years in the northern jungle after Mobil, Advantage Resources International, and Great Western Resources Ltd., Houston, all failed to find commercial hydrocarbons. In addition, Oxy has drilled nine dry holes on its acreage the past 3 years.
BLOCK 52
Perupetro on July 17 disclosed Chevron Corp. is the winner of the tender for exploration and development of Block 52 south of Camisea.
Chevron was the sole remaining bidder for the block after the tender deadline closed. It plans a seismic program and geologic studies, to get under way in the fall.
Top companies, attracted by Block 52's location, began approaching Perupetro 2 years ago, leading the company to hold a tender for the 1.78 million acre block.
One industry source said, however, that the tender's deadlines were too tight to allow companies to cut deals with prospective partners to bid for an area with difficult logistics and high costs. Perupetro turned down a request from potential bidders to extend the deadlines, saying it would have detracted from the tender.
Chevron put in an offer for the royalty it will pay at each stage of production, based on oil and gas sales revenues less costs, separately for oil and for nonassociated gas and condensate.
The contract license is for 30 years for companies that find and develop oil and 40 years for dry gas and condensate. The exploration term is 7 years, divided into five periods, with a minimum work program for each stage. The contractor can apply to complete the contract at the end of the periods.
MAPLE UPDATE
Maple expects by yearend 1996 to start using gas from its central jungle Aguaytia gas field to generate 140,000 kw of electric power for Peru's main power grid.
It expects to start building a gas fired power plant near the city of Aguaytia this month, depending on permitting progress.
Maple signed a contract in 1994 with Perupetro and Petroperu to develop the Aguaytia integrated project, which includes operating two small oil fields, Maquia and Agua Caliente, and the 3,000 b/d Pucallpa refinery and distribution terminal (OGJ, May 9, 1994, p. 15).
The company expects to spend $150
million on the three phase project and has financing in place for it.
Aguaytia, Peru's first integrated natural gas project, contains 302 bcf of gas. Maple's processing plant will produce treated gas to fuel the power plant and supply fuel gas to Pucallpa. A fractionation plant will recover natural gas liquids with a yield of 3,600 b/d of propane, butane, and natural gasoline.
At Aguaytia, Maple has built roads, installed some equipment, and tested one well. Its 2X well flowed at a rate of about 11 MMcfd of gas and 35-40 b/d of liquids.
The second phase includes development of the gas field, as well as construction of the gas processing plant, gas pipelines, and NGL fractionation, storage, and loading facilities.
The third phase, to get under way in second half 1995, includes construction of the power plant, electric substations, and transmission facilities linking it to the central power grid.
Maple has a 30 year operating contract for Aguaytia gas field and a 20 year operating contract for Maquia and Agua Caliente oil fields. It also has a 20 year rental contract for the former Petroperu refinery and sales terminal. Maple delivers about 600 b/d of oil to the refinery from Agua Caliente and Maquia fields.
In the first year of the project, Maple worked over eight wells to boost production in Agua Caliente and carried out a ninth workover in April. The company said it saw a slight increase in production, but "results were not as expected - they are very old fields."
It planned as many as five workovers in Maquia and in the second half will drill a new well in Maquia and two in Agua Caliente.
REPSOL/AMPOLEX BLOCK
Repsol and Ampolex are committed to spend at least $60 million on exploration of Block Z-29 in the Trujillo basin off Peru's northern coast.
Seismic work is to get under way by September, with the first wildcat spudding next year. During the 7 year exploration phase, the companies must complete 3,000 line km of seismic and drill five exploratory wells.
Perupetro classifies the block as high risk because the Trujillo basin is 150 km from shore and prospects are in water depths of 200-500 rn. Those would be the deepest water depths ever drilled off Peru.
Repsol 65% and Ampolex 35% will pay 12% royalties on sales income less costs in the event of commercial production, a lower rate than is typical because of the high risk of the venture.
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