Offshore Blocks On Offer As Amazon Remains Off-Limits

BMI View: Peru has reported strong interest in an offshore bidding round due to in late 2013. While the 9 offshore blocks may attract investment, an absence of data on the underexplored acreage could see bids fall short of ambitious targets. The failure to include a further 27 onshore concessions as planned stems from ongoing environmental and social tensions between the government and native communities that poses downside to near term effort to boost production.

On May 31 st Peru announced the opening of a bidding round for 9 offshore oil blocks. According to government officials, the round was expected to attractive investments at a minimum approaching US$450mn . ExxonMobil and Chevron , were among the 20 companies who expressed interest in the blocks accordi ng to the Peruvian officials. The National Agency of Hydrocarbons (Perupetro) will begin a roadshow in the coming weeks to promote the licensing round which is due in Q413.

The offshore blocks will be the first offered since 2010 and will offer some of the country's most underexplored offshore acreage, with depths reaching as low as 2000m up to 10 km from shore. That no onshore blocks were included in the round was a reversal of prior effort s to include 27 concessions in the Amazon. In 2012, officials at national oil company (NOC) Petroperu announced 36 total concessions would be offered in the recently launched bid round . The areas due to be offered were to be outlined prior to the end of 2012, but demarcation was delayed as a result of a law which required consultation with 'indigenous or native peoples .'

Onshore concessions could be bid later with Petoperu suggesting necessary consultations could begin shortly. However such talks will have to overcome historical mistrust, with local non-governmental organisations arguing that the government has in the past regularly awarded concessions without the necessary prior dialogue with local communities. In short this suggests downside risk to any near term offering of onshore acreage, and may well see investors hold off on bidding or exploration of such blocks should they become available or awarded.

The absence of onshore blocks for bid could slow efforts to bring about a more significant near term increase in production, with offshore campaigns likely to move more slowly and face higher costs than what are typically easily accessible onshore plays. Given Peru's first offshore oil dis covery was not made until 2005, a n absence of data regarding the region's basins and hydrocarbon potential may also slow exploration . Additionally, an absence of infrastructure and offshore support industry would further slow commercialisation.

Production Still Short Of Consumption Leaving Import Requirement
Peru Oil Production, Consumption & Net Oil Exports ('000b/d)

The overall outlook for gas is more promising with Peru set to see its output grow over the course of much of our forecast period, before beginning to slow from the tail end of our forecast period in 2021. However, with current gas production sourced from onshore basins, and limited understanding of gas prospects offshore, the impact of the bid round on the country's gas outlook is uncertain at this point given Peru's waters have yielded largely only o il discoveries to date.

Gas Growth Tapers Off AS Decade Ends
Peru Natural Gas Production, Consumption & Net Exports (bcm)

While the offshore round is said to be attracting interest from major players, whether this translates into actual bids at the prices Peruvian officials will be hoping for rem ains to be determined.

This article is tagged to:
Sector: Oil & Gas
Geography: Peru

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