Anglo-French oil company Perenco has started production at its Block 67 concession in north-eastern Peru, a small accomplishment for a sector that has faced a number of setbacks recently.
President Ollanta Humala traveled on Thursday to Block 67, which is located in the Marañon basin in theAmazonian region of Loreto and about 350 kilometers northwest of the city of Iquitos. He was accompanied by Mines and Energy Minister Jorge Merino, Perenco President Francois Perrodo and the regional president of Loreto, Yvan Vasquez.
Perenco and its partner, Vietnam’s state-owned Petrovietnam, invested just over $700 million in Block 67. The companies will originally produce 1,000 barrels of crude oil per day, ramping up to 12,000 barrels a day in 2015 and, eventually 60,000 barrels a day by 2019.
The start of production should help to halt Peru’s trend of declining crude output. Peru crude production has fallen steadily since the 1980s, when it pumped almost 200,000 barrels of oil a day. Today, Peru produces less than 60,000 barrels a day.
Oil companies and government officials blame the falling output on issues surrounding permitting. Oil companies say that they haven’t been able to do as much drilling as they would like due to delays in seeking permits. Government hydrocarbons agency Perupetro says that too few exploration wells are drilled as a result of the delays, hindering the discovery of new resources.
Senior government officials say they plan to overhaul the permitting process in order to facilitate investments.
As part of the government’s plan to increase activity in the sector, Perupetro planned to hold an auction this week for nine offshore concessions. However, the auction received little interest and the agency decided to suspend the auction. Many companies decided to sit out the auction due to issues over the availability of geological information.
In addition to permitting, oil companies also face opposition to their work by indigenous communities and environmentalists concerned about the impact of drilling in the fragile Amazon rainforest.
Part of the Block 67 area, for instance, also encroaches into the Napo Tigre Territorial Reserve and the Pucacuro Reserved Zone.
Meanwhile, Canadian-based Pacific Rubiales Energy has been prevented from entering one of its concessions in the Amazon region due to opposition from Matses indigenous people. The concession overlaps with Matses territory. Indigenous rights group Survival International has been leading a campaign to pressure the company to pull out of the area.
Activists say that the concerns about oil activity in the Amazon are justified by previous activity. Last week, environmental regulator OEFA fined oil company Pluspetrol Norte about $7 million for causing pollution and allegedly destroying a small lake at its Block 1AB concession in northern Peru. The company has denied wrongdoing.
This week, the Culture Ministry issued a resolution that temporarily blocks the Camisea natural gas consortium in southern Peru from expanding their drilling activities as it could encroach on the territory of uncontacted Machiguenga indigenous people that live in the area. The natural gas project is located in a remote part of Cusco’s south-eastern jungle region.