Oiling the economy

Political chaos puts Peru's petroleum recovery in doubt.

Low oil prices, political uncertainty and community opposition are putting pressure on oil and gas production in Peru. As a result, Peru is becoming a net importer of hydrocarbons, compounding the country’s economic woes.

Earlier this year, the Ministry of Energy and Mines reported that the country had proven and probable reserves of 3.1 billion barrels of oil equivalent (BOE). This ranks Peru sixth in terms of proven and probable reserves in Latin America behind Venezuela, Brazil, Mexico, Ecuador and Argentina.

The recent history and outlook for oil and gas are quite different in Peru. Higher-value oil production has hovered at a low level between 50,000 and 70,000 BOE/day for the past decade. An industry analyst confirms, “Peru barely reaches 60,000 BOE/day, as a comparison Ecuador produces 500,000 [BOE/day] and Colombia nearly a million [BOE/day].”

The industry analyst continues, “International crude prices are low, making oil from the jungle less profitable, add to this the problems with the Northern pipeline, community opposition and political instability.”

Natural gas, on the other hand, has benefited from substantial government investment and has been positioned as the answer to the country’s energy needs. A former senior official at the Ministry of Energy and Mines affirms, “We are good at gas because we consume gas.” Despite this, natural gas production in Peru has still fallen 20% in 2020.

“crude prices are low … add to this the problems with the Northern pipeline, community opposition and political instability.”

Oil and gas industry analyst, Peru

We have already highlighted the importance of mining to Peru’s economic recovery. A similar recovery in oil and gas production is equally important. There isn’t much Peru can do about international oil prices but that doesn’t mean there is nothing to be done.

The PetroPerú executive highlights a serious risk that could be mitigated, “We need the Northern pipeline to be operational, communities have taken station 5 and won’t let us work. It is a matter of willingness to make things happen. The oil reserves in the jungle are gigantic but we need strategic partners for lot 192 and lot 64.”

“We need the Northern pipeline to be operational, communities have taken station 5 and won’t let us work.”

Executive, PetroPerú

Some political stability would not go amiss either, the National Society of Mining, Petroleum & Energy has blamed political unrest for delays to crucial projects such as the $5 billion Talara oil refinery upgrade, expansions of oil and natural gas fields, the approval of a new hydrocarbons law and the relaunch of the troubled southern gas pipeline.

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