Peru’s Congress Approves Sale of 49% of Petroperu to Investors

Peru will open up its state oil refiner to private investment and shelve plans for the company to explore and produce crude oil, under legislation approved by the country’s lawmakers late yesterday.

Congress voted 88-2 with 13 abstentions to allow Petroleos del Peru SA, known as Petroperu, to sell as much as 49 percent of its shares and build a $3.5 billion refinery, according to a statement on the parliamentary website. The legislation will be sent to President Ollanta Humala to be signed into law.

Under the law, Petroperu will be restructured to gain access to capital markets, increase profit and become less vulnerable to political interference. The law limits Petroperu’s investments to the new refinery, barring it from branching into other activities such as exploration until at least 40 percent of the company is in private hands.

“We’re projecting rising sales and a doubling of gross profit,” Finance Minister Miguel Castilla said Dec. 10 in a speech to Congress.

The government values Petroperu, which refines imported crude and distributes fuel, at $1 billion. The company will take on $2.73 billion in debt to build the plant, which will refine 95,000 barrels a day.

The new facility in Talara on Peru’s northern coast will produce cleaner fuel and refine oil at a lower cost than the town’s existing refinery, which will be scrapped, Castilla said.

Petroperu sold production blocks and what was then its largest refinery in 1996 during a wave of asset sales under the government of Alberto Fujimori.

Having private shareholders “will guarantee that the company will be run according to principles of transparency and efficiency, like private companies are,” Alonso Segura, chief adviser to the finance ministry, said yesterday in an interview with Lima-based Canal N.

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