Oil production in Peru falls to critical levels in May: Recovery on the horizon?

The oil production in Peru has experienced a significant decline during the month of May, marking its lowest level so far in the year 2024. According to the figures provided by Perupetro S.A., the extraction of crude oil at a national level averaged 37,739 barrels per day, representing a decrease of -9.37% compared to the same period of the previous year. Out of the 16 active lots in the country, production contracted in seven of them, including Lot 95 located in Loreto, which historically has been one of the most productive. In May, this lot reached an average daily extraction of 15,664 barrels, below the annual average of 17,743 barrels. The decrease in production is not limited to Lot 95, as several lots in different regions of the country also experienced a contraction in their extraction levels. This situation has mainly concentrated in the northwest area, affecting lots located in Piura and Tumbes. Furthermore, the local fuel refining capacity has not managed to recover, standing at an average of 176,000 barrels per day, far from the 250,000 barrels per day recorded in 2017. This lack of capacity to process national and imported crude oil has generated a deficit of around 100,000 barrels per day to meet the domestic demand for petroleum products, leading the country to resort to costly imports. The new Talara refinery, which was expected to contribute to increasing the refining capacity, has faced operational issues, particularly with its flexicoking unit. Despite efforts to fully operate it, it has not yet reached 100% operation. Carlos Gonzáles, managing director of Enerconsult, pointed out that Petroperú's financial situation and the lack of timely payments to the operators of the lots in Piura and Tumbes have contributed to the decrease in oil production. This financial instability is also reflected in the deterioration of the state company's working capital. On the other hand, the Ministry of Economy and Finance has projected a recovery in hydrocarbon production for this year, based on increased oil activity and the drilling of new wells in Lot 95. However, experts like Erick García Portugal warn that this recovery may not be immediate and that regulatory and investment changes will be required to truly boost production. It is important to highlight that social opposition in some areas where oil lots are located has contributed to the halt of exploitation contracts, which has also impacted the national oil production. Given this scenario, a challenging outlook is foreseen for the oil industry in Peru, where the recovery could extend beyond 2025.