Tecnicas Reunidas Seen Winning Refinery Contract in Peru

Peru probably will choose Tecnicas Reunidas SA for a $2.7 billion contract to build an oil refinery for state-owned Petroleos del Peru SA, the country’s Finance Minister Miguel Castilla said.

The contract is set to be signed in “coming weeks,” Castilla said in an interview at the World Economic Forum in Davos. Tecnicas has built about 80 percent of Spain’s refining capacity.

“The project will likely start in the first quarter,” Castilla said. The Spanish engineering company, which has already begun designing the complex, will carry out construction over three to four years, he said.

Peru President Ollanta Humala plans to emulate Brazil and Colombia by transforming Petroperu into a partially privatized, major oil player. Building a refinery at the site of its current Talara unit on the northern Pacific coast is the centerpiece of that plan, processing crude from oil fields in the Amazon Jungle and cutting dependence on imported fuel.

Peru wants Tecnicas Reunidas to expand the Talara refinery’s capacity to almost 100,000 barrels a day from 65,000 barrels now, Castilla said. The new complex will be built in place of the existing one, meaning it’s practically a “greenfield” project, the minister said.

Tecnicas Reunidas will raise debt to finance the project, while the government plans to extend a guarantee on the debt for as much as $1 billion during the contract, the minister said. “This will allow for access to better borrowing conditions,” he said.

Share Sale

Separately, Peru is hiring advisers for its state oil company, known as Petroperu, ahead of a planned sale of as much as 49 percent of its equity. The public share sale won’t take place before 2016, Castilla said.

Peru seeks to emulate Colombia’s Ecopetrol SA, whose shares have more than doubled since the company raised about $3 billion in a 2007 initial public offering.

The new refinery will refine crude from Paris-based Perenco SA’s Block 67 in Peru’s Amazon region, which started output in December.

Tecnicas Reunidas rose as much as 1.7 percent to 40.95 euros and traded at 39.82 euros, up 1.1 percent, as of 4:15 p.m. local time. The ISE Global Engineering and Construction Index was 0.3 percent lower.

Before it's here, it's on the Bloomberg Terminal.