Growth and goodwill: How PetroTal has become Peru's top oil producer

Toronto-listed oil and gas firm PetroTal is pursuing inorganic growth opportunities as it seeks to expand its South America footprint. BNamericas speaks to the Peru-focused company's exploration chief, Max Torres, about the near-term plans and how PetroTal has struck harmony with local communities.

BNamericas: We saw that PetroTal expected to complete the 20H well drilling campaign at the Bretaña field in late September with a view to evaluating and testing the Vivian 1 sand (VS1). Has that well now been completed and could you perhaps share with us how the campaign went?

Torres: It is the first well to actually test VS1. It's a short horizontal well that reached a lateral depth of around 200m. It was a successful test. The well was producing something near 350b/d of oil which, for a well with short lateral penetration, is a very good test. This is not a full test of VS1 but it could open the window to future development.

So, basically now we have two reservoirs: the traditional VS2 and now the VS1. It is a work in progress and the drilling campaigns are very recent. Basically, we need to do more work to come up with conclusions about how we're going to develop VS1. Now we're drilling another well, 21H.  

BNamericas: Are you encouraged by how that's going? And do you have a timeframe for when it will be completed?

Torres: It's going to take around 40 days and then subsequently it's going to be tested. We think it's going to be another typical Bretaña well, producing 5,000, 6,000 or 7,000b/d. They are very prolific wells. Hopefully this will be another good one and that we can add more reserves and production to the field. Hopefully the well will be tested by the end of the year and then we'll start on two other development wells: 22H and 23H. By February or March we hope to complete drilling so that we can evaluate the results and define the future of the field.

BNamericas: In the first half of the year, production averaged 18,400b/d. Has this figure changed your full-year guidance? 

Torres: The issue is not the field itself but how to take it to the market. Right now we're using barges to deliver it to Iquitos and Manaus. We depend on river levels and unfortunately this year the levels have been very low because of the drought. This means there were several weeks when our production was around 10,000b/d but we also had a peak of 21,000b/d. 

BNamericas: What about the possibility of transporting the oil to Ecuador or south via the Norperuano pipeline?

Torres: Right now we're testing different routes, one of which is to Ecuador. If that is successful it could potentially open another market for us. If we can open this route to the north, it will have a very big impact on our economics and our future development. It will be a prolific way of monetizing our production.  

The Norperuano pipeline option is one that we're discussing with Petroperu. There are some social and technical issues that need to be resolved before that can happen but it's on our radar because it's the simple solution to the problem. 

BNamericas: PetroTal established a 2024 budget of US$150-175mn. Is the company on track to reach this figure?

Torres: Yes, absolutely. We have invested close to US$500mn during our seven years in operation and we expect the 2024 budget to be executed as planned. Most of our capex is related to drilling and so far that has gone to plan.  

BNamericas: You mentioned the three development wells at Bretaña. Are there any other drilling campaigns on PetroTal's radar across its asset portfolio? Do you have any immediate drilling plans for block 131, in which PetroTal acquired a 100% working interest from Cepsa in May?

Torres: We're still awaiting approval from the government, but from a practical standpoint, this block is basically ours. We're getting ready to hopefully drill some infill wells there next year. We're evaluating some additional potential on the [Los Ángeles] field as well.

We're also preparing a campaign for block 107, which involves frontier exploration. We're waiting for environmental licenses and other permits, which can take time in Peru. Hopefully we can drill this well in the first quarter of 2026. 

Those two blocks, besides block 95, are the targets for exploration activity in 2025 and 2026. 

Additionally, we're preparing to shoot approximately 1,200km of 2D seismic in block 95. We've already signed a contract with BGP and are currently mobilizing crews. Hopefully we'll be able to start drilling there in 2026. We think it's a very promising area because there are three or four prospects that are on trend with Bretaña. And we're always on the lookout for other opportunities in Peru and other countries.

BNamericas: Is PetroTal actively seeking further inorganic growth as we speak?

Torres: We have very aggressive M&A growth plans. Our aim is to continue growing and our main target is Peru, especially northern Peru. And yes, we're very actively looking for opportunities in the Marañón basin and elsewhere in Peru. Right now we think that there are opportunities in Peru. It's a country that's open for business and I think most of the companies that are currently here are underinvesting. 

So we think this is a great opportunity for us. We're also looking in neighboring countries like Ecuador. As I mentioned, we're trying to open this route to Ecuador and hopefully it's going to be part of our strategy as well. And we've been looking at E&P projects in Colombia. It's a very attractive country with many opportunities but there is also a lot of competition because many companies are active there. I think the priority is Peru followed by Ecuador and then Colombia.

BNamericas: PetroTal has been able to advance its projects while maintaining a good rapport with local communities. Could you tell us how the company has achieved this harmonious relationship?

Torres: PetroTal has a very successful social management project. The Amazon is a very sensitive area, socially and environmentally, so this is one of our main priorities. 

This is the only way a company can be successful in this type of environment. We've been able to come up with some very creative solutions, including the idea of a social fund. This is a special fund in which 2.5% of production profits are invested, on top of royalty payments, which are separate. The fund is managed by a special board which includes members of the community. These resources go directly toward projects that are proposed by the community.

They have included initiatives related to internet coverage, solar panels, fisheries, schools and other projects. It has led to a significant economic boost for these areas. And it includes a clause that states that if there is a blockade or any kind of action from the community that stops production, the fund will automatically be stopped for the duration of the blockade. And it has been incorporated into the contract so now it's a legal obligation. It's a very unique approach and an effective response to the social challenges facing the oil and gas industry.