Peru’s Oil & Gas investment guide 2018/2019

Información clave sobre la industria de hidrocarburos en el Perú.

The oil & gas industry in Peru has evolved from an industry in decline to a major contributor to economic growth in Peru. From 1995 to 2014, investment in this sector increased from US$147 million to US$1.19 billion, an increase of 800%. For years 2018-2019, it is expected that US$2.0 billion will be invested in around 16 oil & gas projects, which represents 11.1% of all the investments to be made in 2018-2019.

Among other key factors in the success of this industry is its enormous potential. Currently, Peru has the potential and reserves to produce more than 150 thousand barrels of oil across the country (including both onshore and offshore blocks).

Synergies created between production from the Camisea Project and other industries (energy, mining, industrial, among others), have also contributed to an increase in this potential.

Moreover, the increasing demand of electricity in Peru during the last twenty years due to the development of mining and industrial projects, and the growth of its main cities, has also served to better position primarily fossil fuels such as oil & gas in the country’s energy structure. However, this situation is going in the coming years.

The 2014-2025 National Energy Plan highlighted the need to diversify the sources of energy production due to trends of investment in clean energy in the global market.

In this context, this oil & gas investment guide is structured to help investors broadly evaluate Peru’s oil & gas sector investment conditions and provide them a general updated landscape of the industry. In that sense, we have included various aspects usually taken into consideration by investors from around the world before making critical decisions on the development of new oil & gas operations.

Importance of Peru’s oil & gas sector

The oil & gas sector in Peru has gone through a transformation, from an industry in decline to a major contributor to the economic growth in Peru.

Oil exploration and exploitation investments evolution (1995-2017)

Hydrocarbon production and exports

The investment and work involved in the sector contributed to the recovery and the positive evolution of the hydrocarbon national production. An emblematic example of this growth is the Camisea project. This project was not only significant to the country, but it also contributed to putting Peru on the map of natural gas producers.

The hydrocarbon investment for years 2018- 2019 is estimated at approximately US$4 billion and the growth of the sector is estimated to be 1.8% for 2018, after two difficult years marked by low oil prices. This growth will rely on the investment portfolio and Peru’s geological potential, which already has the attention of investors interested in offshore Blocks.

Hydrocarbons audited production (2007-2017)

Potential of Renewable Energy Sources   

According Bloomberg reports, 33% of the world’s electric power will come from renewable sources by the year 2050. Peru has great potential for the development of clean energies, and in this sense, investments should be oriented in the following energies:

• Hydroelectricity
• Wind power energy
• Geothermal energy
• Solar energy
• Biomass

Trends in the Oil & Gas and the Energy industry in Peru

Trends in the hydrocarbons industry

The actual international context, in which oil prices have still slumped more than 60% of their value compared to 2014, truly puts companies at a stage in which it will be necessary to produce more efficiently. But it also brings an opportunity to discuss new policies that may help to develop new projects.

In particular, this means that governments will have to step up in order to prevent negative consequences in economies which rely heavily on oil. Certainly, countries like Mexico and Colombia have taken decisions towards reducing the tax burden of oil companies. Meanwhile, Peru is looking forward to following those steps, especially regarding the reduction of royalties.

Trends in the Energy industry

The energy revolution is just starting in Peru. Until now, the market has only shown great openings for development of big corporations that are able to meet the requirements set in regulatory laws that aim to attract high amounts of investment. Despite this, there are lesser known offerors who act as market agents that are trying to expand the scope of benefits of using clean energies to users that cannot connect to the already built big systems of electricity. This is happening with some start-ups.