CAPITAL: LIMA
MONETARY UNIT: NEW SOL
REFINING CAPACITY: 182,250 B/CD
OIL PRODUCTION: 97,100 B/D
OIL RESERVES: 310 MILLION BBL
GAS RESERVES: 8.7 TCF

Peru estimated that it needs $287-360 million/year in drilling investment the next 5 years to double its oil reserves to 700 million bbl. Desired drilling rate is 40-50 wells/year, said Perupetro Pres. Rafael Samaniego.

Peru's reserves peaked at 820 million bbl in the early 1980s and have been declining since.

Perupetro estimated that Peru will have a $430 million oil trade deficit by yearend 2000. It does not expect an energy trade surplus until the Camisea gas fields start producing around 2004.

The national oil agency said it will re-evaluate contract terms and geological risks and compete more successfully for foreign investment with neighboring countries, such as Ecuador, Bolivia, Brazil, and Colombia. The first change came late in the year when Peru reduced its 15% minimum royalties for exploration and development contracts on offshore blocks to 10% for blocks in 200-400 m of water on the continental shelf and 5% in water deeper than 400 m.

The government expected the project at Camisea, a group of fields ranked collectively as one of Latin America's largest gas fields, to generate more than $6 billion in tax revenues during 30 years--a badly needed boost for Peru's commodity-based economy.

During the year Peru relaunched its privatization process with the intention of selling the state's shares in a refinery and hydroelectric complex, among other assets.

The government under new President Valentin Paniagua signed the Camisea development and transportation contracts in December 2000.

A consortium led by Argentina's Pluspetrol and including Hunt Oil Co., Dallas, and SK Corp., Seoul, is to develop the fields. Tecgas, a unit of the Techint Group, leads the consortium for transport and distribution of the gas and gas liquids in partnership with Hunt, SK, Algeria's state Sonatrach, and Peru's Graña y Montero. The consortium, which bid $1.45 billion to build and operate the line, has 44 months to start up the system and pledged to try to do it in 36.

The Camisea fields, discovered by Royal Dutch/Shell Group in the mid-1980s, have proved reserves of 13 tcf of gas and 600 million bbl of condensate.

Peru was tendering 16 offshore blocks in four areas on its continental shelf. The first is opposite the Talara basin, on the far north coast; the second is opposite Salaverry, where Repsol explored unsuccessfully. The third area is on the shelf between Lima and Ica; and the fourth is opposite Arequipa and Moquegua in the far south.

Only two offshore blocks were under license: Block Z-1 off the north coast by Argentina's Perez Companc and Block Z-3 by an Occidental Petroleum Corp. unit.

Another US company, Petrotech International Corp., is the only offshore producer, with an average 13,000 b/d of 30-35° gravity oil and 15 MMcfd of gas on Block Z-2B off the north coast. The wells cost $1 million each and produce 150,000 bbl each.

Petrotech's most recent discovery well, LN-1X, flowed 300 b/d of 34º gravity oil from one zone. Four other productive zones in the Salina had not yet been tested. The well is in 80 ft of water.

In other E&D highlights, Perez Companc signed a 2-year technical evaluation agreement covering Bloxk XVII in the Sechura basin. It adjoins Olympic Peru Inc.'s Block XIII, where three gas discoveries have been made since 1996.

ExxonMobil was evaluating the northwestern part of Block 78 in the Madre de Dios basin and drill cuttings from the 1976 Karene 3X well. Mobil's first exploration well, Candamo X-1in 1999, in sensitive rain forest on eastern Block 78, was termed a significant gas find in spite of low porosity and permeability but details were not made public.

Early in the year Peruvian planners were considering a crude oil pipeline link with Ecuador. The $400 million project would involve 270 km in Peru and 150 km in Ecuador. It was understood that Ecuador was interested in shipping crude to Peru through the system.