Investments in hydrocarbons in Peru show signs of recovery amid historic lows.

The Peruvian Hydrocarbons Society (SPH) revealed that in March of this year, an exploratory well was drilled in the country, specifically in Block IV of the Talara basin, Piura, under the responsibility of the company Unna Energía (formerly Graña y Montero Petrolera). This action marked a milestone as it represented the first exploratory well drilled in Peru in three years, with the last one recorded in 2021. It is crucial to recall that by the end of 2023, investments in the hydrocarbons sector in the country reached a historically low level in five years, amounting to US$324 million, almost half of the US$619 million reported prior to the onset of the pandemic in 2019. Out of this figure, only US$2.7 million were allocated to exploration, in stark contrast to the US$61 million invested for that purpose in 2019, highlighting a significant decrease in impetus towards the search for new reserves. Despite the increasing demand for fuels, reaching 280,000 barrels per day, crude oil production has dropped to its lowest level in April, slightly above 40,000 barrels per day on average. This situation has led to an increase in imports of derivatives at a higher cost, which inevitably translates into higher prices for end consumers. The SPH had foreseen that, if this pace continues and due to the lack of investments in exploration, Peru would only have reserves for the next sixteen years. However, the Ministry of Economy and Finance (MEF) projects a recovery in hydrocarbon investment for this year, estimating a 21.7% increase, mainly driven by higher disbursements in exploitation and exploration projects. Among the planned initiatives is the development of Block 192 by Petroperú in collaboration with Altamesa, with an investment of US$138 million to enhance production capacity, as well as drilling and reconditioning of development wells. Additionally, an investment of US$107 million is planned in Block 95 operated by Petrotal, which includes drilling and commissioning of three new production wells. Furthermore, a higher investment of US$124 million is expected in Block 56 in 2024, for the construction of a cluster with surface facilities and the building of a compression station near Nuevo Mundo in Cusco. These production segment investments would amount to US$369 million, representing a 14.95% increase compared to the previous year. Regarding exploration, the MEF highlights an expected revitalization in this area with planned investments of US$13 million in Block XXIII, operated by Upland Oil & Gas. Investments of US$7 million in Block Z-61, US$10 million in Block Z-62, and US$8 million in Block Z-63 are also considered, all offshore fields operated by Anadarko in the marine area off the northern coast. However, despite these optimistic projections, various stakeholders in the sector emphasize the need to address pending issues to attract more investments in hydrocarbons. Former Deputy Energy Minister, Arturo Vásquez, stresses the importance of defining new exploration areas with flexible and competitive contracts. Ysabel Calderón from Perupetro points out the challenges they face in signing new contracts due to delays in prior consultation processes and the creation of reserve zones. In this regard, Carlos Gonzáles from Enerconsult suggests updating the Organic Hydrocarbons Law to extend contract terms beyond the current 30 years, seeking greater flexibility like that already applied by other countries in the region. He also proposes modifying the calculation of oil royalties to include transportation and storage costs, in order to promote a more attractive environment for investment in the sector.