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Pacific reopens Peru oil tap to test pipeline

09 May 2017 20:27 (+01:00 GMT)
Pacific reopens Peru oil tap to test pipeline

Lima, 9 May (Argus) — Canadian independent Pacific Exploration and Production started test flows on Peruvian block 192 in anticipation of a full restart after a 14-month forced hiatus.

Pacific shut down operations on the jungle block in February 2016 after the state-owned northern crude pipeline was closed because of repeated ruptures. The 1,106km (663mi) pipeline suffered 13 separate incidents in 2016, three attributed to infrastructure problems and 10 to vandalism, according to state-run PetroPeru, which owns the pipeline.

PetroPeru chief executive Luis Garcia Rosell said on 5 May that an inspection of the pipeline's three legs was nearly completed. He said he expected the pipeline to reopen in June.

Pacific was averaging close to 10,000 b/d of heavy crude before it was forced to halt operations on the 512,000ha (5,120km2) block located near the border with Ecuador. UK-French Perenco also stopped production on nearby 2,000 b/d block 67.

Peru's oil and gas promotion agency PeruPetro reported that Pacific produced an average of 6,500 b/d in the first week of May. The production is being used to test the pipeline infrastructure. Perenco has not restarted production.

Pacific took over block 192 in August 2015, after a 30-year contract held by Argentina's Pluspetrol expired. The Peruvian state had attempted to secure a new 30-year contract, but no bidders came forward. It opted for a two-year contract with Pacific to keep the block open.

Pacific's contract for the block will not expire this August as planned, but will be extended to take into account the force majeure currently in effect.

Peru's congress approved legislation in September 2016 to award block 192 to PetroPeru once Pacific's contract ends. PetroPeru has not operated upstream since its acreage was sold in the mid-1990s.

PetroPeru has already started conversations with Pacific concerning a future partnership. The two companies met on 5 May to discuss options. Garcia Rosell said partnering with Pacific made sense.

He said a possibility would be to allow Pacific to operate the block in a 75pc-25pc deal, with Pacific assuming risk.

"We would like to enter into an agreement as soon as possible, so that Pacific can begin to invest in the block with a guarantee that its investments will be for the long term," said Garcia Rosell.

Pacific produced a net 72,524 b/d of oil equivalent (boe/d) in the first quarter this year, down by 49pc from a year earlier, mainly reflecting the firm's July 2016 loss of its strategic Rubiales license.

Most of the firm´s output comes from Colombia.

Pacific's expected exit production for 2017 is 80,000-85,000 boe/d.

The company plans to spend $325mn-$375mn this year, with most of the capital budget earmarked for maintenance and development. In 2016, Pacific spent $161mn.

Pacific is in the process of divesting about $28.5mn in acreage in Brazil, Peru and Colombia to buyers including UK independent Amerisur and Spanish Cepsa. The divestiture campaign will relieve Pacific of some $129mn in exploration commitments.

The company reported a first quarter net profit of $8.5mn compared to a $901mn net loss a year earlier.