Back

Latin American Economy & Business - February 2015 (ISSN 1741-7430)

Peru: Troubled times for Pluspetrol

A confrontation on 10 February between local police and the community in Pichanaki, (province of Junín), could have major implications for oil and gas production in Peru. According to the government, around 500 people invaded Peruvian army barracks temporarily leased to Pluspetrol, an Argentine oil company with a licence to explore nearby Block 108. Police used tear gas to clear the area: violent clashes broke out, leaving one student dead from bullet wounds, along with 37 civilians and 30 police officers injured. The protestors say that not one but three people were killed in the clashes.

A number of other key facts are contested. According to Carlos Echevarría of the Frente de Defensa de Pichanaki, Pluspetrol has polluted the local environment. “For us there is nothing to negotiate: it is just a question of this company leaving the area, and nothing more”, he said. In contrast, Daniel Guerra, a Pluspetrol manager in Peru said, “this is a very basic piece of exploration work, we haven’t drilled, we haven’t contaminated anything, and we can’t spill any oil because we are not producing any”.

Wider issues are involved. Some experts say Block 108 could hold gas reserves equal to, or larger than, the massive Camisea deposits (believed to total about 13.4trn cubic feet), which have given the Peruvian economy a major boost since they were discovered by Shell in 1986. Pluspetrol is one of the main partners in the Camisea operating consortium, along with Hunt Oil Co., SK Corporation, Repsol, Tecptrol and Sonatrach. And Peru’s extractive sector, including oil and gas plus mining, has been facing rising opposition from local communities. It is estimated that as much as US$60bn worth of mining and energy projects are stalled because of local opposition and environmental approval issues.

At the government’s request, Pluspetrol began to withdraw from the area later in the same week. Energy and Mining minister Eleodoro Mayorga initiated a dialogue with the local residents, saying that in view of local feelings the authorities would review the situation. Pluspetrol was awarded the licence to explore Block 108 in 2005, a rectangular piece of land of around 1.2m hectares. Local people generally make a living by from coffee and cocoa crops. The Argentine company says it has observed all the legal, environmental and social terms of its licence, and in doing so has consulted with 34 local communities, held 268 information workshops and reached individual agreements with over 2,000 local farmers. It says it has also funded a local health programme and school libraries.

Pluspetrol also faces opposition in another part of the country, in oil block 1-AB in Loreto, in the northern jungle. There at the end of January, members of the local Achuar indigenous community stopped the company’s exploration work by blocking roads and seizing riverboats in a dispute over compensation payments. Pluspetrol has been operating in 1-AB since 2001, and with production of 3,100 barrels per day, it is Peru’s largest single oil producing block currently. The protestors are demanding compensation for the use of their lands and the installation of a local sawmill; they also want a community-owned company to be given a services contract. Pluspetrol has countered that the community should not receive compensation because it is outside the area of direct influence of oil operations.

The 1-AB licence expires in August, and the government may ask for bids to continue operating it. Pluspetrol has said that depending on the terms, it might seek to stay on. According to Guerra, “we’ve definitely got a lot of experience in 1-AB, we’ve been working there for 15 years, it will depend on the government’s tender terms, but in principle we are interested”. He also noted that some of the environmental and compensation issues pre-date Pluspetrol’s arrival, going back to the 1970s, when Occidental Petroleum was active in the area. The government has declared environmental emergencies in various parts of 1-AB in recent years, because of pollution linked to past spills and leaks. Pluspetrol, Guerra said, had spent roughly US$100m on environmental amelioration measures. Other oil companies have also expressed interest in 1-AB if the government invites bids for a new operating licence.

Perupetro, the hydrocarbons regulator (not to be confused with the state oil company Petroperu) has said that under existing regulations it cannot call for new bids for 1-AB until the outstanding social issues are resolved. “Since it is already producing, it is an attractive block. You come in and already have revenue”, noted Perupetro president Luis Ortigas. Ortigas added that a call for bids for a further 25 blocks (19 in the Amazon and six offshore) might be postponed because of the current fall in oil prices. “With the drop in the price of crude we have to think again. Maybe we have to delay or reprogramme… we could reach the conclusion that it’s not convenient now to launch bidding,” Ortigas told news agency Reuters.

Peru’s business community is troubled by the implications of Pluspetrol’s difficulties. Carlos Gálvez, president of extractive industry lobby Sociedad Nacional de Minería, Petróleo y Energía (SNMPE), said that events in Pichanaki could raise questions about the rule of law and the enforceability of commercial contracts. “This could be seen as a break point, after which concession contracts signed by the state and companies are seen as not being fully respected in the future, that would be worrying” he said.

End of preview - This article contains approximately 901 words.

Subscribers: Log in now to read the full article

Not a Subscriber?

Choose from one of the following options

LatinNews
Intelligence Research Ltd.
167-169 Great Portland Street,
5th floor,
London, W1W 5PF - UK
Phone : +44 (0) 203 695 2790
Contact
You may contact us via our online contact form
Copyright © 2022 Intelligence Research Ltd. All rights reserved.