HALT ORDERED FOR PART OF PETROPERU MONOPOLY

Peru's government has ended state oil company Petroleos del Peru's monopoly on downstream operations as well as imports and exports of oil and gas. The action by the administration of President Alberto Fujimori affects refining, marketing, and distribution of oil and gas in addition to exports and imports. In addition, the government has moved to untangle the approval process for foreign investment in Peru's upstream sector. Fujimori, who assumed the presidency in July 1990, has

Aug. 26, 1991

2 min read

Peru's government has ended state oil company Petroleos del Peru's monopoly on downstream operations as well as imports and exports of oil and gas.

The action by the administration of President Alberto Fujimori affects refining, marketing, and distribution of oil and gas in addition to exports and imports.

In addition, the government has moved to untangle the approval process for foreign investment in Peru's upstream sector.

Fujimori, who assumed the presidency in July 1990, has promised to push Peru toward a free market economy.

WHAT'S INVOLVED

A five person tariffs commission, to be named by Fujimori, is to negotiate retail petroleum products prices, although it was not immediately clear how this will operate.

The aim is to gradually free products prices from government controls.

Almost two thirds of petroleum product sales revenues goes to Peru's treasury in the form of taxes.

The government Aug. 2 hiked fuel prices overall by 12%, taking the price of the main product, 84 octane gasoline, to the equivalent of $2.11 (U.S.)/gal, of which Petroperu gets 70/gal. Heavy domestic products subsidies in recent years have created a cash squeeze for the state oil company.

Petroperu has had serious problems providing adequate maintenance at its refineries because of lack of cash. It has a total 160,000 b/d of refining capacity to handle Peru's current 1 16,000 b/d of crude production.

RED TAPE CUT

Fujimori also implemented new rules intended to cut red tape involved in reaching agreement for exploration contracts with oil companies.

Future contracts negotiated with Petroperu will need approval only by an executive decree ratified by the cabinet.

Drafts no longer will be circulated to eight entities, including the tax office, customs, ministries, controller's office, and chiefs of staff of the armed forces.

Under the new rules, contractors to Petroperu now will be able to export surplus crude once domestic crude requirements are covered.

In the first half of this year Peru's production averaged 116,800 b/d, compared with oil demand of about 105,000 b/d.

Petroperu expects to import an average 36,000 b/d of crude this year to meet refinery requirements. The company exports the same volume of resid as the volume of crude it imports, but the difference in prices squeezes Petroperu cash flow still further.