--Oil companies in Peru create new association to promote
reforms
--Association head says country could double crude oil output
with reforms
--Group looks to regulations in neighboring countries as
potential models for Peru
By Ryan Dube
LIMA, Peru--Oil companies in Peru are calling for government
reforms that they say could reverse years of declining crude output
and convert the South American nation into a net exporter of crude
oil.
Earlier this month, 16 companies created a new association,
called the Peruvian Hydrocarbons Society, to urge President Ollanta
Humala's administration to overhaul regulations in the hydrocarbons
sector to promote more investments.
The association includes the local units of Brazil's state-run
Petroleo Brasileiro SA (PBR, PETR4.BR), Anglo-French Perenco SA,
Spain's Repsol SA (REPYY, REP.MC) and Ecopetrol SA (ECOPETROL.BO,
EC), Colombia's state-run oil firm.
The president of the association, Beatriz Merino, said in an
interview Monday that existing regulations are stifling
investments, and have led to a decline in production as mature
oilfields aren't replaced by new discoveries.
Peru's oil production has fallen steadily since the early 1980s,
when it was turning out about 195,000 barrels a day. Today, Peru
produces about 64,000 barrels a day, according to the latest
government figures.
In order to meet its energy needs, the country imported about
$3.6 billion of crude in 2012, mainly from Ecuador, according to
the Central Reserve Bank of Peru.
Ms. Merino said crude production has dropped partially due to
excessive red tape and a lack of resources for authorities that
oversee the energy sector. The association estimates that in Peru
it takes a company about 15 years from the discovery of an oilfield
until the government gives it the go-ahead to start production,
while in Colombia the same process takes about three years.
"The regulatory framework [in Peru] is a nightmare for oil
companies," said Ms. Merino, a well-known lawyer who was prime
minister in the administration of former President Alejandro
Toledo. "We need a legal framework that is quick and
transparent."
A spokesman for the Mines and Energy Ministry didn't immediately
respond to a request for comment. However, Mines and Energy
Minister Jorge Merino recognized the need for hydrocarbon reforms
in a statement earlier this month, pointing to the need to speed up
the permitting process. "We have to review all the procedures," the
minister said.
Ms. Merino said companies are confident Peru could become a net
exporter of oil by doubling its crude output in the next 10 years
if reforms are put in place. "The oil is there, but what we're
seeing is an industry that doesn't have favorable institutional and
regulatory frameworks," she said.
According to the latest government figures, Peru had 580 million
barrels of proven oil reserves in 2011, up from 400 million in
2001.
The association is looking at regulations in neighboring
countries like Brazil, Colombia and Ecuador as models to develop
Peru's hydrocarbons sector.
State-run companies play an important role in the oil industry
in those countries. Ms. Merino said the association would welcome a
stronger Petroleos del Peru SA (PETROBC1.VL), Peru's state-owned
energy company, to help develop the sector.
The company, known as Petroperu, runs refineries, a pipeline and
gas stations, but it got out of producing oil about 15 years
ago.
Petroperu officials have said the company plans to return to
production by taking a minority stake in 36 oil blocks expected to
be auctioned by the government this year. However, officials have
also said Petroperu isn't planning to put up cash for exploration
or drilling, leaving private-sector investors to cover those
expenses.
Ms. Merino suggested that the private sector could have concerns
about Petroperu's plan for taking minority stakes without investing
in exploration.
"[Petroperu] could be a good partner, but to be a good partner
it has to participate not only in the benefits, but also the
risks," she said. "This is something that will have to be discussed
publicly."
Write to Ryan Dube at ryan.dube@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires