Peru Says Will Cut Royalties In Current Oil Contracts By July

Reuters

LIMA, Feb 2 (Reuters) - Peru plans to lower the royalty payments it receives from oil companies by July in order to help them survive the oil price crisis and might allow some to postpone part of their payments, the country's energy agency, Perupetro, said on Tuesday.

Twenty-nine companies with exploratory contracts and three with extractive rights have declared force majeure as the drop in oil price has sapped profit and financing in recent years, said Rafael Zoeger, the president of Perupetro.

Crude oil prices have dropped about 70 percent from the 2014 high over $100 barrel. Current prices at around $30 barrel have triggered spending cuts as oil companies slash investment in new wells.

Perupetro would offer new royalties based on the conditions of each oil block. Zoeger called the revisions "urgent" and said Perupetro would aim to finish them in the first quarter or at latest, the second.

"Otherwise what's going to happen is they're going to start giving up their oil blocks," he told Reuters in an interview. "Companies that can't do business are going to leave."

Several global oil companies operate in Peru, including Pacific Exploration & Production, Perenco, China National Petroleum Agency and Ecopetrol S.A..

Peru's main oil association, the Peruvian Hydrocarbon Society, said the government should cut royalties on current output in half and allow companies to extend the length of their contracts.

Perupetro announced in November that it would slash royalties from the current 20 percent to about 5 percent on average in future contracts awarded.

However, Zoeger said that plans to auction off the rights to six offshore oil blocks and 26 Amazonian concessions have been pushed back again at the request of interested companies.

Perupetro had previously planned on open bidding on those blocks starting in the first quarter.

The bidding round will likely not start until at least late July, after a new president takes office, Zoeger said.

Peru is a net oil importer, and its production dropped to 58,000 barrels per day in 2015, almost half of peak production in the 1970s.

Zoeger added that Perupetro was also proposing to reduce the $10-per-barrel fee that state-owned energy company Petroperu charges private companies for moving crude through its pipeline in northwestern Peru.

Petroperu is the state-owned energy company and Perupetro is the state agency tasked with negotiating oil contracts.

"Companies want Petroperu to lower it to $4, but that's complicated because it wouldn't cover costs," Zoeger said.

(Writing by Mitra Taj; Editing by Matthew Lewis)



WHAT DO YOU THINK?


Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.


Most Popular Articles