Market squeeze delays sale of Peru's Talara refinery

High oil prices and keen competition in middle distillates have pinched the earnings of Petroperu SA, prompting the company to delay the planned sale of its 62,000 b/d Talara refinery. The sale was originally slated for December. No new date has been decided. "We have to choose the most propitious date for the sale," said Armando Echeandia, Petroperu's chairman and head of its privatization committee, in an interview. "The increase in oil prices to around $25/bbl is beyond all our

Nov. 18, 1996

2 min read

High oil prices and keen competition in middle distillates have pinched the earnings of Petroperu SA, prompting the company to delay the planned sale of its 62,000 b/d Talara refinery.

The sale was originally slated for December. No new date has been decided.

"We have to choose the most propitious date for the sale," said Armando Echeandia, Petroperu's chairman and head of its privatization committee, in an interview. "The increase in oil prices to around $25/bbl is beyond all our forecasts."

The privatization committee is nevertheless planning a road show in the U.S. and Venezuela to respond to questions about the refinery, Echeandia said. Merrill Lynch & Co. Inc. will forward memoranda on the Talara refinery to prospective buyers.

"We hope that oil prices will return to normal within the next few months and the refining business will become more attractive," Echeandia said.

Petroperu plans to sell the Talara refinery on the same general terms as those it offered for the La Pampilla refinery (see related story, p. 16). It will offer 60% of the shares to buyers. The state will keep 40%, and the plant's workers can purchase as much as 10%.

Echeandia said the state may keep a "golden share" in the refinery. A golden share gives the government control over issues it considers sensitive, such as a decision by the new owner to sell the refinery.

Privatization on track

Despite the delay in the Talara sale, Echeandia predicted that Petroperu would complete privatization of its basic assets by yearend 1997.

Other units slated for privatization include the concession on the 200,000 b/d capacity North Peruvian pipeline, the Iquitos and Conchan refineries, and marine terminals.

According to Echeandia, the sale of these other units will not necessarily have to wait on the Talara refinery offering, although the privatization committee would prefer to sell the refinery first.