Petrobras Boosts Peru Investment, To Spend $117M This Year

LIMA Jun 15, 2007 (Dow Jones Newswires)

Petroleo Brasileiro SA's (PBR) Peruvian unit seeks to sharply boost its presence in the Andean nation, with a wide range of investments.

Those include working to improve crude oil output at the fading block X, to drill for natural gas and to possibly invest in a petrochemical project.

The general manager of Petrobras' Peruvian unit, Pedro Grijalba told Dow Jones Newswires the company plans to invest $117 million in Peru in 2007.

Of that, it will sink at least $95 million into drilling 104 wells to increase production at block X, located in northern Peru.

The field, which first began producing in 1914, currently produces an average 13,300 barrels of oil a day.

"By the end of the year we should reach around 14,000 barrels a day," Grijalba said in the interview held in the company's headquarters in Lima.

Grijalba said the company expects to drill a similar number of wells in 2008 and to invest a similar amount of money. It hopes to produce an average 15,000 bpd by the end of next year.

According to Grijalba, block X is a mature, depleted field that requires intense effort. "Our dream is to produce 18,000 barrels a day on block X," he said.

Exploration Plans Outlined

Together with block X, Petrobras has four other exploration and production contracts in Peru.

At block 58, located near the Camisea gas fields, Petrobras submitted its environmental impact study in May and is currently waiting for government approval.

The Petrobras official said he expects to begin drilling in late 2008 or early 2009 as the river is only high enough to transport the necessary equipment to the block between December and March.

According to Grijalba, the study will likely be approved in October or November which will not give the company enough time to organize drilling for this year.

On Block 110, located north of Camisea, Petrobras is evaluating data and beginning the studies required for the environmental impact study, he said.

An environmental study takes 18 to 24 months, he said.

It also has a contract for block 112 located in northwestern Peru and for block 117 located in the extreme north.

Things are at a much earlier stage on those blocks, he said.

Petrobras also has a stake in block 57, which lies adjacent to Camisea's block 88. According to Grijalba, their state is around 37% and the block is operated by Repsol YPF (REP).

Grijalba said that the equipment is in place and drilling is due to begin any time.

"We will have results by the end of the year," he said.

On block 103, where it holds a 30% stake and is partnered with Occidental Petroleum Corp. (OXY) and Repsol YPF (REP), the group is currently evaluating seismic data to define the drilling schedule.

Finally, it is in the process of carrying out a technical evaluation in partnership with state oil company Petroperu for six blocks located in the extreme north.

While he said Petrobras is already highly committed in Peru given the number of blocks it has, Grijalba said the company is open to participating in a round of bidding for 19 new blocks that the government is promoting.

"We are evaluating the feasibility," he said.

The government plans to award those blocks, located across Peru, on July 12.

Looking At Petrochemical Investment

Earlier this year Petrobras signed an agreement with Petroperu to evaluate the feasibility of developing a petrochemical project in Peru.

According to Grijalba, those studies have advanced significantly and Petrobras remains keen.

"These studies cost a great deal of money. We are advanced. We have moved to the stage where we are defining technology," he said.

A plant to produce fertilizer could cost $800 million but a polyurethane plant would cost up to $2.3 billion, said Grijalba.

He said, however, it is essential that Congress approve legislation to define the framework of the petrochemical industry in Peru. "This will allow us to see the conditions and based on this define our participation," he said.

The location of the plant also remains to be defined.

Government officials have previously said the plant could be located near the port of Matarani close to Arequipa or at Ilo, both in southern Peru.

Those locations, however, will require a pipeline.

Petroperu and a unit of Suez Energy International are currently developing a feasibility study for the pipeline.

Government news agency recently quoted Petroperu chief Cesar Gutierrez as saying that Algerian state-owned oil and gas company Sonatrach would decide in early July whether to participate in the project to build a pipeline.

The pipeline has an $800 million to $1 billion price tag, according to Gutierrez.

Copyright (c) 2007 Dow Jones & Company, Inc.