OXY SETTLES DISPUTE WITH PERU OIL FIRM

Occidental Petroleum Corp. will spend at least $60 million for exploration and development the next 2 years in Peru under a pact with state owned Petroleos del Peru that resolves a long dispute over production and prices. Plans call for Oxy to drill 20 development wells on its jungle Block 1AB in 1992-93. It has options to drill another 10 wells in 1994 and two more in 1995, depending on results of the initial program. That compares with 14 wells Oxy has drilled on the block since 1985.

Dec. 23, 1991

2 min read

Plans call for Oxy to drill 20 development wells on its jungle Block 1AB in 1992-93. It has options to drill another 10 wells in 1994 and two more in 1995, depending on results of the initial program. That compares with 14 wells Oxy has drilled on the block since 1985.

Oxy noted its risk service contract for Block 1AB enhances the overall attractiveness of its investment in the block and incorporates benefits of recent government measures aimed at stimulating foreign investment in Peru's petroleum industry (OGJ, Dec. 9, p. 27).

Oxy's agreement with Petroperu modifies a contract signed in March 1986 that former Petroperu Pres. Alan Garcia recently rescinded.

Under the current agreement, Peru's government is to pay Oxy more than $40 million in back payments Petroperu owes it for crude deliveries. Oxy in turn will void invoices totaling $84 million plus interest it has claimed Petroperu owes it, reflecting a higher price for the crude.

New terms call for Oxy to receive 55% of the agreed value of a basket of crudes vs. 47.4% it had been receiving and 61% it was claiming.

Further, that basket of crudes has been changed to reflect the lower gravity of Oxy's jungle crude. Replacing 27 gravity Alaskan North Slope crude is 18 gravity Shengli crude, and Loreto crude becomes part of the basket only when Peru exports the crude. The other two crudes in the basket, Saudi Arab heavy and 1% sulfur No. 6 fuel oil, are retained. Currently, Block 1AB fields produce more than 52,000 b/d of oil.