The Energy and Mines Commission approves extension of oil contracts

The Energy and Mines Committee of Congress has approved an important bill that could have a significant impact on the country's oil industry. With 11 votes in favor and one against, it has been decided to extend the deadlines for oil contracts, which currently have a maximum duration of 30 years, to a maximum of 40 years. If approved in the full session, this measure would modify Article 22 of the Organic Hydrocarbons Law, aligning the exploration and exploitation deadlines for hydrocarbons with those of natural gas contracts, which already have a duration of up to 40 years. The author of this bill, Congressman Carlos Alva, has stated that this law aims to reactivate investments in the national hydrocarbon industry in a context of increasing international oil prices. If approved and enacted, this measure would apply not only to new contracts but also to those currently in force. Holders of these contracts would have the possibility to request a ten-year extension, thus reaching a total duration of 40 years. However, the extension of contracts would not be automatic and would be subject to the concessionaire presenting an investment program to Perupetro S.A., the corresponding state agency. During the committee debate, it was agreed to incorporate a proposal that includes the results of direct negotiations between Perupetro and the contractor, as well as other aspects that the agency determines, considering the geological and locational differences of oil lots in the country. Another significant change introduced by this bill is the authorization for Perupetro to retain the hydrocarbons produced by the contractor until they have paid the corresponding royalties. This retention would be considered as an in-kind payment, allowing Perupetro to commercialize the retained hydrocarbons to generate income for the State. Experts in the sector, such as Carlos Gonzáles, have highlighted that this change in the law would correct a mistaken differentiation introduced in 1987, which limited the duration of natural gas contracts to 40 years, while oil contracts had a 30-year limit. This correction would remove obstacles for the joint exploitation of oil and gas in the same reservoir, which was considered technically unfeasible under current regulations. On the other hand, César Gutiérrez, former president of Petroperú, has expressed that this modification comes somewhat late, as the initial proposal sought to benefit lots in the northwest of the country whose contracts were nearing expiration. However, many of these contracts have already been transferred to Petroperú or tendered under conditions involving the participation of the state oil company, limiting the immediate impact of this measure on those contracts. In summary, the approval of this bill represents an important step to reactivate investments in the national hydrocarbon industry and align the deadlines for oil contracts with those of natural gas. Although it still needs to go through the full Congress, this measure could have significant implications for the production and exploration of hydrocarbons in the country, creating a more favorable environment for the development of the Peruvian oil industry.