Private firms sign exploration and production contracts in Peru

Sept. 18, 1995
Private companies have signed a flurry of oil and gas exploration and production contracts in Peru. State oil regulatory agency Perupetro SA in recent weeks signed contracts covering areas on Perus northern coast, northern and southern jungles, and the Titicaca basin. Four of the contracts are for exploration and development in new areas, and the others update terms of contracts covering existing blocks. In other upstream action, a unit of Chinas state oil company outlined plans to

Private companies have signed a flurry of oil and gas exploration and production contracts in Peru. State oil regulatory agency Perupetro SA in recent weeks signed contracts covering areas on Perus northern coast, northern and southern jungles, and the Titicaca basin. Four of the contracts are for exploration and development in new areas, and the others update terms of contracts covering existing blocks. In other upstream action, a unit of Chinas state oil company outlined plans to significantly boost drilling and crude oil production in Peru. In an effort the past 4 years to boost declining oil reserves, Peru has promoted investment by foreign petroleum companies in oil and gas exploration. In August 1993, the government approved a new hydrocarbon law that gives companies operating licenses instead of service contracts so they can market the oil and gas they produce. The new law also replaces an upfront production split with royalty payments.

Pluspetrol-Oxy

Perupetro last month signed an exploration and development licensing contract with Pluspetrol SA, Buenos Aires, and Occidental Petroleum Corp. for Block 54 in Perus northern jungle. The block covers almost 2 million acres in the Maranon basin south of Block 1AB, where Oxy currently produces an average 58,000 b/d of crude oil. The two companies are committed to spend at least $36.2 million. The minimum work program includes a seismic survey and five wildcats. Pluspetrol will be operator during an initial exploration phase, and Oxy will serve as operator in the next phase, including drilling. The contract is for 30 years, including a 7 year exploration stage, if the companies find and develop oil. The contract will be for 40 years if the partners develop nonassociated gas, gas liquids, and condensate. If the companies are successful, they will pay royalties of 18-40% of revenues less costs on a sliding scale tied to the volume of production.

Other E&D contracts

Perupetro also signed a licensing contract with Frances Elf Aquitaine and partners covering Block 66 in the Ene basin of the central southern jungle. Consolidated Eurocan Ventures (Bermuda), a unit of International Petroleum Corp., Vancouver, B.C., and Anschutz Overseas Corp., New York, are partners in the contract. Eurocan completed a technical assessment of the block last year. The acreage is in a hot spot of activity west of the supergiant Camisea gas fields complex and Blocks 52 and 75 (OGJ, Aug. 7, p. 51). Another new contract involves Russian company Yuganskneftegas, which will operate Block S-4 in the Titicaca basin. The acreage includes former Block S-3, which Lima company Petroandes SA explored until relinquishing it last year, and parts of Blocks S-1 and S-2. Perupetro also signed a contract with Yuganskneftegas Petroandes SA, ratifying the combine formed last year in which Yuganskneftegas is a partner 75% with Petroandes. This contract covers exploration of Block S-2. The combine has spudded the first wildcat on the block, and drilling was expected to wrap up in August.

Revisions, extensions

Among contract extensions or revisions Perupetro signed recently are those to:
  • Adapt Occidental del Amazonas March 1993 exploration and production service contract covering Block 4 to the 1993 hydrocarbon law. The contract also authorizes Ranger Oil Ltd., Calgary, to earn a 25% interest in Block 4. Separately, Oxy plugged as dry the first wildcat on Block 4, also in the Maranon basin.
  • Extend for 1 year the 20 year Oxy/Bridas secondary recovery project north of Talara that expired July 23. The contractors are Occidental Peruana Inc., Oxy Chemicals Canada Ltd.

    , and Bridas Exploraciones & Produccion SA.

  • Execute a risk service contract with local company GMP SA and Mexicos Mexpetrol SA de CV to ratify Mexpetrols 50% interest in the northern coast Carpitas-Zorritos fields, where GMP has operated since 1990.
  • Replace a March 1993 production contract with an oil and exploration and production licensing contract with Cia. Petrolera Rio Bravo SA, Lima, and Pan American International Petroleum Corp., a unit of American International Petroleum Corp., New York. The companies will pay a royalty of 53% to a crude oil production level of 300 b/d, 61% to 600 b/d, and 70% for more. They also will pay 85/bbl to transport the crude about 15 km to Petroperu SAs Talara refinery.
Meantime, Pan American will complete the blocks minimum work program, including drilling three wells and completing 90 line km of seismic survey by Jan. 1, 1996.

Sapet Block VI work

Sapet Development Corp., a subsidiary of China National Petroleum Corp., signed a contract with Perupetro in late July covering northern coastal Block VI. It expects to boost oil production from the block to a peak of 3,000-4,000 b/d within 3 years. The 38,441 acre block, previously operated by Petroperu, produced an average 1,600 b/d in June. Petroperu put the block up for tender in June 1993 under a program in which the cash strapped state operating company released low producing northern coast oil fields to private companies in a bid to boost drilling and production. Oxy won the tender in 1994. However, the company later said it will concentrate its efforts on jungle exploration and refrained from signing a contract. Sapet was next in line. Sapet has begun work on an environmental impact statement related to its plans for the block, said company Pres. Wang Ming Cia. The contract commits Sapet to drill 30 wells in the first 5 years. Some wells will be very deep down to 8,000 ft, Wang said. Sapet expects to spend more than $30 million, including outlays for secondary recovery work. In a first stage, however, it plans to conduct 3D seismic surveys to obtain data on the areas complex geology. The geology here is very different from Chinas, Wang said.

Sapet Block VII

Elsewhere in Peru, Sapet has completed one third of a 182 sq km 3D seismic survey on northern coast Block VII, where it has been working since January 1994. It signed the Block VII contract in late 1993, making it Chinas first petroleum investment in Latin America (OGJ, Nov. 8, 1993, p. 43). Sapet began the seismic survey in March after its five wells on the block were noncommercial. A team from China is conducting the 3D survey with U.S. equipment. Sapet will spend more than $10 million on Block VII work, including the $6.5 million survey and $1.5 million for the five wells. The company increased the blocks oil production to more than 1,000 b/d by June from 600 b/d in early 1994. It achieved the increase mainly by replacing old pumping units and other equipment and installing a new power generator. Sapets contract requires it to drill 60 wells in the first 3 years of its 20 year term and start a secondary recovery program in the third year. However, the company said it could not begin a secondary recovery project without better knowledge of the blocks reservoirs. Sapet expects to resume drilling on Block VII in January and believes it could produce 4,000-5,000 b/d there within 3 years. Sapet also wants to expand its operations on the coast and in the jungle. The company plans to bid for Petroperus northern coast Block X, if and when the state company proceeds with its planned sale of its 60% stake in the block.

It also is considering exploring a jungle block. In addition, Sapet will be a bidder, probably next year, for the Oxy-Bridas secondary recovery contract covering Lobitos, Los Altos, and Los Organos oil fields near Talara when it comes up for tender in July 1996. Copyright 1995 Oil & Gas Journal. All Rights Reserved.