Peru pressing hydrocarbons restart as royalties slide

Peru’s energy and mines ministry has approved guidelines for the monitoring, request of information or other actions to verify compliance of government coronavirus crisis measures for the gradual renewal of hydrocarbon activities.

The guidelines follow the publication of a ministry resolution that approved criteria for the resumption of sector projects after the government authorized the phased-in restart of economic activity.

Under the guidelines, operators must file a COVID-19 prevention and control plan for the workplace with the ministry’s hydrocarbons office (DGH) that will then be sent to the health ministry.

Project owners also must submit detailed information of planned works to DGH and energy and mining investment regulator Osinergmin, add the guidelines, available here.

This push comes amid new data from hydrocarbons licensing authority Perúpetro that reveals a substantial drop in royalties.

Year on year, royalties in April from the production of crude, natural gas and NGLs fell 88%, 71% and 83%, respectively to US$2.41mn, US$5.32mn and US$4.45mn.

Perúpetro figures also show that crude output this month through May 12 averaged 31,048b/d versus 45,801b/d in April, while production of gas and NGLs rose to 25Mm3/d and 80,401b/d, respectively, from and 22.4Mm3/d and 73,807b/d.

“Some oil blocks have had zero production due to various operational or social problems, and others such as 67 and 95 in Loreto stopped their activities due to international prices that are below their production costs and the suspension of transportation of the Nor Peruano pipeline for adaptation to sanitary measures to prevent the spread of the virus,” according to hydrocarbons industry association SPH.

SPH highlights that Perupetro and the energy and mines, and economy and finance ministries are preparing some measures such as the postponement of royalty payments and investment pledges for exploration and production contracts to maintain the liquidity of companies and prevent the return of blocks.

Also Read Well completions in Peru fall nearly 40% and Data Snapshot: Peru crude, gas output falls for consecutive month

In its just released national production report, Peru’s statistics institute (INEI) said that overall economic activity fell 16.3% year on year in March, after 127 months of continuous growth, impacted in part by reduced hydrocarbons output.

For its part, the International Energy Agency said on Monday: “The outlook has improved somewhat and prices, while still far below where they were before the start of the COVID-19 crisis, have rebounded from their April lows. There are two main reasons for this: the easing of lockdown measures and - more important - steep production declines in non-OPEC countries alongside the commitments made by the OPEC+ agreement."

NORPERUANO PIPELINE

Meanwhile, state oil company Petroperú detected a “minor outcrop” of crude at a section of stretch two of the Norperuano oil pipeline in Jaén province, Cajamarca region.

The NOC said it has put into action a contingency plan to carry out remediation and repair work, alerted authorities and begun an investigation.

The duct has been out of service since April 30 to comply with the national state of emergency and obligatory social distancing on account of COVID-19.

Pictured: Latest Norperuano incident (Credit: Petroperú)