Frontera shuts Peru oil wells on pipeline outage

  • : Crude oil
  • 18/12/03

Canada's Frontera Energy is starting to shut in crude production in Peru because of delays in repairing a severed pipeline in the northern jungle.

Protesters in a small indigenous community cut the 100,000 b/d northern oil pipeline on 26 November. The pipeline owner, state-owned PetroPeru, has been blocked by the community from reaching the remote site in Loreto state, and estimates that at least 8,000 bl may have spilled.

Frontera had been increasing production from block 192 in recent months, reaching 11,430 b/d in November from a year-to-date average of close to 9,000 b/d, according to data from hydrocarbons regulator PeruPetro. The block is located more than 200km from the site of the incident at km 193 in the Morona district.

"It is expected that once access is granted, (pipeline) repairs will be completed in a short time…The Company will provide an update to the market once production from the block resumes," Frontera said this morning in announcing the production cuts in response to the pipeline force majeure declaration by PetroPeru.

The incident coincided with Canadian independent PetroTal's announcement that it will develop block 95, also in the Loreto. The company will need the pipeline to evacuate its future production.

PetroPeru pipeline manager Manuel Ugaz calculated last week that the cost of shutting in production at block 192 is $200,000 a day. The block accounts for around a fifth of Peru´s overall crude production.

Because of the remote location and rough terrain surrounding block 192, moving crude by truck -- which Frontera and other companies do in neighboring Colombia when pipelines are out of service -- is not an option. No other oil companies are affected by the pipeline outage.

The pipeline was initially closed on 17 November, when residents in the Mayuriaga indigenous community kidnapped 20 oil workers, four from PetroPeru and 16 from contract companies, according to the Peruvian police. The perpetrators threatened to set fire to the nearby Morona pumping station. The hostages were released after four days.

"This is not only an environmental crime, but an economic crime. We have been forced to close the pipeline, which harms all Peruvians," said Beatriz Hart, PetroPeru's manager of community relations.

Ugaz described the attack as well-planned and premeditated. He said aerial photos show the spill is not close to any waterways, suggesting that the perpetrators did not want to contaminate local water supply.

The attack is not directly related to PetroPeru – unlike a spill in the community two years ago – but was orchestrated to protest alleged fraud in 7 October municipal elections. The national election board dismissed the allegations.

Protests leaders were unavailable for comment. The community is on its own with the protest, as the indigenous federation grouping Wampi native communities has refused to back the partisan protest. Neighboring communities have also kept silent.

PetroPeru has registered 26 incidents along the aging 1,100km pipeline since early 2016, with 19 caused by some form of sabotage.

Ugaz said most of the incidents have been provoked by residents seeking jobs in remediation, with PetroPeru paying upward to $30/day for labor, much higher than average wages. "It's a perverse way of trying to make money," he said.

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more