On May 14, 2010, Perupetro S.A. opened the bidding round for 25 blocks in Peru’s Amazonian forest region and along the country’s coast over a total area of 42,471 sq miles (110,000 sq km). Perupetro, the Peruvian state-owned company in charge of promoting, executing, and auditing license and services contracts for the bidding round, had planned to launch the offer in 2009 but was delayed due to conflicts involving indigenous groups and E&P activity.

Daniel Saba, president of Perupetro, is optimistic the process will be a success due to increased interest. “It is very important to resume the international auction after the difficult moments we endured,” he said. The round is a push by the Peruvian government to become a net hydrocarbons exporter.

Peru, blocks

Peru has 25 blocks on offer covering a total area of 42,471 sq miles (110,000 sq km). (Map courtesy of Deloitte)

Peru’s potential
Peru is located within the Subandean thrust front zone, one of the most prolific hydrocarbon trends in South America, which extends from the Venezuelan Andes through Colombia and Ecuador to southern Peru.

Of the 25 blocks available in the current bidding round, 24 are located in the Marañon-Ucayali river basins and the southeastern region of Madre de Dios, each ranging from 309 to 3,282 sq miles (800 to 8,500 sq km). “All blocks offered have been defined near or surrounding recent discoveries, which may confirm their enormous possibilities to contain hydrocarbons,” Oscar Miro-Quesada Rivera, senior supervisor of promotions for Perupetro, said.

The Marañon Basin is the largest in Peru and corresponds to the southern extension of the Putumayo and Oriente basins of Colombia and Ecuador, respectively. The Putumayo-Oriente-Marañon region has produced 2.88 Bbbl of oil and 660 Bcf of gas from Cretaceous and Tertiary sandstones. There are 18 sedimentary basins with hydrocarbon potential in Peru.

According to Rivera, “The only block located near the northern Peruvian coast is expected to have production similar to the nearby blocks located in the offshore region, which also shows good oil and gas discoveries.”

Currently, Peru is producing approximately 150,000 b/d of liquid hydrocarbons. By 2013, production should double, reaching nearly 300,000 b/d of liquid hydrocarbons as three Marañon Basin fields are brought onstream. According to the “Peru Oil & Gas Report” from Business Monitor International, the country will account for 2.19% of Latin American regional oil demand by 2014 while providing 1.14% of supply.
Five to six discoveries in the last two years, a drilling success rate of 80% in the Camisea gas and condensate fields, and stable and attractive investment terms have contributed to increased interest in the licensing round.

Companies that have expressed interest in the available blocks include Talisman Energy Inc., ConocoPhillips, Chevron, BHP Billiton, ExxonMobil, and Repsol YPF. France’s Total SA is interested in blocks in the northern Marañon Basin, Amazonas, and the eastern Ucayali Basin close to recent discoveries. The Anglo-French company Perenco will participate in the bidding round and already has a contract to develop Block 67 in the Loreto region, investing US $2 billion in the area.

Licensing terms, requirements
Each basin has its own minimum work program. The exploration phase can last for a period of seven years and can be extended, under special circumstances and conditions, for three additional years. The phase is divided into periods in which minimum activity requirements (i.e., reinterpretation of existing data, acquisition of seismic information, drilling of exploratory wells, etc.) are agreed upon.

If hydrocarbons are encountered, companies will be expected to pay a 30% royalty.

According to Rivera, operators will be required to develop the necessary facilities and infrastructure for the blocks. Perupetro will be available to offer support to facilitate the operations.

Letters of intent, qualification documents, and additional forms for the bidding round are due by Sept. 24, 2010. Technical and economic bids must be submitted by Oct. 11, and the evaluation and award of contracts will occur Oct. 14. Technical information, environmental studies, and social studies will be provided free of charge.

For more information, visit www.perupetro.com.pe.