Peru Expects Oil Royalties Accord With Producers by April

Peru’s government expects to reach an agreement on natural-gas royalties and domestic supply by April with producers including Hunt Oil Co. and Repsol YPF SA (REP), the president of the state oil contracting agency said.

The seven-company Camisea group will sign an additional accord clause to make 2.5 trillion cubic feet of its 11 trillion cubic feet of gas reserves available for the domestic market, President Aurelio Ochoa said. Exploration work will boost Camisea’s reserves to supply a 20-year export contract, he said.

“There’s a mutual will to reach an accord on good terms and it shouldn’t delay beyond April,” Ochoa said today in an interview at his office in Lima. “In any country the world over, the local market comes first.”

Peruvian President Ollanta Humala was elected last year on pledges to cut natural-gas exports to Mexico as demand from local power plants and petrochemical projects surges. Lack of gas supply is delaying $10 billion in investment projects by companies such as Duke Energy Corp., CF Industries Holdings, Inc. and Orica Ltd., according to the National Society of Mining, Petroleum & Energy.

Peru’s oil and gas exports jumped by 50 percent to $5 billion last year after a separate group including Hunt, Repsol and SK Group of South Korea started a $4 billion liquefied natural-gas export plant.

Daniel Guerra, spokesman for Camisea operator Pluspetrol SA, didn’t immediately return telephone calls and an e-mail seeking comment.

Oil Contracts

Peru will offer as many as 30 oil-exploration contracts in the second half of this year, Ochoa said. The exploration blocks, which cover areas off Peru’s Pacific coast and in the Amazon jungle, are pending government regulation of an indigenous consultation law next month, he said.

Companies are expected to increase investments by 13 percent to $1.7 billion in Peru’s oil and gas industry this year and drill at least 25 exploration wells, compared with 18 last year, Ochoa said.

Repsol, which today said it will start production this year at its Block 57 field bordering Camisea, will supply petrochemical projects on the south coast, Ochoa said. Construction will begin on a $1.5 billion southern Andean gas pipeline in June, he said.

Tripling Output

State oil company Petroperu SA may double installed capacity of its 200,000 barrel-per-day oil pipeline once Repsol, Talisman Energy Inc. (TLM) and Perenco SA start production at their northern jungle fields, Ochoa said. The three companies may produce a total 150,000 barrels per day by 2016, tripling Peru’s crude output, he said.

“Crude prices above $100 a barrel are a major incentive for these projects,” Ochoa said. “This will reverse Peru’s status as a net oil importer.”

Crude oil for April delivery gained 52 cents, or 0.5 percent, to settle at $107.07 a barrel on the Nymex. Natural gas for April delivery rose 9.7 cents, or 3.8 percent, to $2.616 per million British thermal units.

To contact the reporter on this story: Alex Emery in Lima at aemery1@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net.

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