Peru resumes oil auction amid optimism

May 17, 2010 at 5:27 PM
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LIMA, May 17 (UPI) -- Peru returned to oil auctions in a strong signal to the market it would seek to clean up the scandal-ridden national hydrocarbons industry.

The new bidding process involves 25 new blocks, mostly in the Amazonian forest region and is likely to be followed by more auctions later.

State-owned Perupetro's President Daniel Saba said he considered the resumption of the bidding process important for putting the 2008 scandal behind the nation, even though it led to the removal of President Alan Garcia's entire Cabinet in 2009.

Legal proceedings over the bribery allegations involving senior government officials and Norwegian Discover Petroleum company are still continuing. Although most of the officials implicated in the taped telephone conversations over bribes lost their positions there is no indication yet if the investigations would lead anywhere, analysts said.

Meanwhile, as widely predicted by industry analysts, the government drew an international response from prospectors as it announced the new bidding cycle. Meetings in Lima before the start of the auctions were well attended.

Of the 25 exploration blocks, 24 are located in the Maranonn-Ucayali river basins and in the southeastern region of Madre de Dios, with the surface areas of each of the blocks ranging from 80,000 hectares to 850,000 hectares.

A coastal area that covers 314,132 hectares in northwestern regions of Lambayeque and Piura is the other remaining block, Saba said.

The bidding process is expected to end Oct. 14 with the award of concessions.

The latest Peru Oil & Gas Report from Business Monitor International said the country will account for 2.19 percent of Latin American regional oil demand by 2014, while providing 1.14 percent of supply.

Latin American regional oil use of 6.93 million barrels per day in 2001 reached an estimated 7.78 million barrels per day in 2009. It should average 7.92 million barrels per day in 2010 and then rise to around 8.631 million barrels per day by 2014. Regional oil production was 10.30 million barrels per day 2001, and in 2009 averaged an estimated 9.69 million barrels per day, said the report. Latin American oil use is set to rise to 10.79 million barrels per day by 2014.

Peru's real GDP in 2009 rose by 1.5 percent, compared with growth of 9.8 percent in 2008. "We are assuming average annual 4.7 percent growth in 2010-2014. We are assuming peak oil and gas liquids production of 130,000 b/d by 2012/2013, with the country expected to pump 120,000 b/d in 2010," said the report.

"Consumption, beyond any 2009 weakness, is forecast to increase by 2-3 percent per annum to 2014, implying demand of 189,000 b/d by the end of the forecast period," said the report.

To meet a shortfall, Peru would still need to import about 66,000 barrels per day of oil by 2014, said the report.

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