Petroperu permitted for upstream production

In a surprise turnaround, Peru’s congress on Friday voted to allow the state-owned Petroperu to produce in the country’s prolific block 192, just days after a two-year contract was awarded to the Canadian operator Pacific E&P.

Petroperu was previously forbidden by law from upstream production in the country as a way to stimulate foreign investment. The new law makes an exception for block 192. It is unclear what the legal implications will be, as the new law does not directly affect Pacific E&P’s contract, but President Ollanta Humala is expected to veto the law. This veto could be overridden by congress.

Petroperu currently oversees a $4.5 billion downstream marketing operation.

Falling oil prices and lawsuits with local indigenous groups in recent years have discouraged foreign investment, making Peru’s government anxious to find operators for its oilfields. After the deal with Pacific E&P was announced on Tuesday, protesters began to occupy oil wells and airports, and set fire to cars in multiple regions.

Block 192 is found in the Northern Marañon Basin near the border with Ecuador. Its 17 oilfields make up for 17 percent of the country’s total oil output. Current output at block 192 is about 12,000 barrels of oil per day, though it had run as high as 117,000 barrels of oil per day in 1979. Pacific E&P via press release said it would be able to increase daily production.

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