Peru to Take Bids for Oil Exploration Blocks in July

Friday, Apr 03, 2009

Peru will take bids for oil and natural-gas exploration blocks in July as part of the Andean nation’s biggest drive for energy investment, said the head of Perupetro, the state oil-contracting agency.

Perupetro President Daniel Saba said that the areas in the northern and central jungle and southern highlands will be awarded in November after he meets with potential investors in the U.S. and U.K.

“These are practically Peru’s last available exploration areas,” Saba said yesterday in a telephone interview from Lima. “Companies are looking to invest in exploration this year despite low oil prices as they plan for the long term.”

The contracts are part of a bid to attract $10 billion in investments needed to double Peru’s oil and gas output over the next five years. Peru, South America’s fifth- largest natural-gas producer, said the value of its oil and gas exports rose by 23 percent to $2.8 billion last year.

Companies in Peru are slated to spend about $1.4 billion in energy exploration this year, up from $1.1 billion in 2008, Saba said. Peru has a record 107 exploration accords with companies such as ConocoPhillips’ Burlington Resources unit, Reliance Industries Ltd. and Petroleo Brasileiro SA.

Producers are planning to drill 10 exploratory wells this year, including a gas well in May in Petrobras’ Block 58 that borders the Camisea gas fields, Saba said.

Exploration Delays

Still, oil exploration companies may delay projects because of difficulties to secure financing, said Cesar Gutierrez, an oil analyst and former chief executive officer of Petroperu.

“Many of these juniors are going to request contract extensions while they hunt for funding,” Gutierrez said in a telephone interview. “Peru’s heavy crude fields aren’t good business with oil around $50 a barrel.”

The 13 blocks are the first to seek bids since an oil kickback scandal forced President Alan Garcia to shuffle his cabinet and replace the head of Petroperu in October.

Five exploration blocks originally awarded to Petroperu and Discover Petroleum of Norway in September have been suspended during an investigation into allegations energy officials planned to favor Discover during auctions, Saba said.

Crude oil for May delivery fell $1.27, or 2.6 percent, to $48.39 a barrel on the New York Mercantile Exchange. Oil prices have dropped 50 percent over the past 12 months.