Will Petroperú close 2024 with a 5th board chair?

Alejandro Narváez Liceras took over as chair of Peru’s financially distressed national oil company (NOC) Petroperú in November, making him the fourth person to occupy the post this year.

The appointment of Narváez, who returned to the position he held in 2003-05, came two months after his predecessor, Oliver Stark Preuss, resigned in September after heading the NOC’s board since June.

Before Stark, Carlos Linares Peñaloza was at the helm in March-April, following Pedro Chira Fernández’s tenure, which began in April 2023. Linares and Chira also resigned.

Among the reasons for the constant shuffles are the perceived lack of government urgency related to improving the company’s sustainability, legal wrangling and political infighting.

The government’s naming of Narváez has led to wider criticism about Petroperú’s governance challenges and raised concern about the economic impact of the company’s financial situation.

Furthermore, the naming of Óscar Vera Gargurevich as Petroperú CEO has drawn fire from those who see the appointment of one of President Dina Boluarte’s former energy and mines ministers as nothing more than political positioning.

Reaction

“These political, ideological and irresponsible appointments reinforce the position that the executive is against a restructuring of Petroperú,” Confiep, a confederation of Peru’s principal business groups, said following the selection of Narváez.

“This situation sends an unfavorable message to financial agents, the markets and, above all, to citizens,” Confiep added.

The Unión de Gremios, which includes the national society of industries (SNI), expressed “its deep concern about the lack of direction and inadequate management that the government demonstrates regarding the situation of Petroperú.”

The Lima chamber of commerce (CCL) said the government’s emergency decree, which established extraordinary economic and financial measures to help guarantee Petroperú’s sustainability, goes in the wrong direction.

“The amount of money owed by the state company is equivalent to 1.6% of GDP, 7% of the 2025 public budget and 26.4% of the 2025 public investment budget,” CCL said.

The need to comply with an emergency decree that approved a new economic and financial restructuring of Petroperú was emphasized by Peru’s hydrocarbons association SPH.

“Management aligned with the restructuring objectives must be the way to position Petroperú as a solid and reliable company in the market,” said SPH president Felipe Cantuarias.

Meanwhile, mining, petroleum and energy industry group SNMPE criticized the decree, which it says is a bailout of over US$2.69bn “without clearly and precisely establishing the deadlines and goals of the restructuring to which it must be subjected, as well as the measures that guarantee good corporate governance.”

SNMPE called for Petroperú to have a technical and independent board, free from political interference and conflicts of interest.

Also read

Executive confirms implementation of Comprehensive Transformation Process and austerity measures for Petroperú

Executive approves urgent measures to boost Petroperú's transformation

Petroperú signs financial operations to guarantee its sustainability

Petroperú response

“All members of the board of directors, appointed by the shareholders’ meeting, are top-level professionals, with solid professional experience and in-depth knowledge in their areas of specialization,” Petroperú’s communications management office told BNamericas.

At his first board session, Narváez said, “I assume this appointment with optimism and commitment, starting a new management with great expectations and clear objectives for the benefit of the company and the country.”

The roadmap to reverse Petroperú’s situation, described as “critical” by the chairman, includes a cost reduction and resource optimization plan and improving the efficiency of the new Talara refinery and other business units.

Goals also envision increasing the state operator’s fuel market share to 38% from 24% and maintaining its upstream presence, while at the same time addressing increasing socio-environmental scrutiny of oil and gas exploration and production, particularly in the Amazon, and contingencies along the Norperuano oil pipeline.

Also read

Petroperú's fuel market share well below target

Petroperú calls for tender to find an operating partner for lot 64

Outlook

Regarding Petroperú’s high-level personnel changes, S&P Global Ratings credit analyst Gaston Falcone told BNamericas that it is “one of the points that has most affected the evolution of the company.”

Falcone stressed that to help the company’s finances, the new Talara refinery must operate at 75-80% capacity to recover its share of the domestic fuel market.

Petroperú has said that the 95,000b/d refinery is processing over 90,000b/d.

The analyst said that in the case of upstream aspirations, the company needs to organize and have greater clarity for a potential build-out of what he sees as a still small segment for Petroperú.

Adriana Eraso, a director and primary rating analyst for Fitch Ratings, told BNamericas that “the Peruvian government so far has had the ability to give the company the necessary liquidity to meet its obligations, and we're seeing macro metrics of the Peruvian economy that growth has been maintained.”

She added that Petroperú’s standalone rating is 'CC' which indicates that the company by itself could not meet its obligations.

“So, if it weren't for all these capital injections, all these instruments to improve liquidity that the Peruvian government has made available to the company, it would have gone into default this year,” Eraso said.

Peruvian economic think tank IPE has called out Petroperú’s “inefficient” management, which it says has generated a high cost for the State.

“Until 2024, financial support to Petroperú has amounted to 20.2bn soles [US$5.4bn]. These funds could have financed 100 high-performance schools such as those to be built in Cusco, Huancavelica and Pasco, and 40 medium-complexity hospitals such as the one in Villa el Salvador,” IPE argues.

Also read

Private participation option pitched during Petroperú debate

Source: Petroperú

Source: Petroperú (NTR = New Talara Refinery)

BNamericas previously reported that Petroperú’s net losses widened to US$745mn in January-September from US$530mn in the same period last year, and revenue slid 12% to US$2.64bn.

The state operator attributed the results to reduced sales and lower prices, as well as higher sales costs.

Its share of the local fuel market stood at 24% in the nine-month period, compared to the previously set target of 33% for 2024, a standing impacted by what Petroperú says was a non-scheduled stoppage of the flex coking unit at the Talara refinery, “aggressive” competition and port closures which complicate cabotage.

Source: Petroperú

Source: Petroperú