Oil pipeline attack unsettles Peru: Update

Adds finance minister comments, strategic assets plan.

State-owned PetroPeru's 100,000 b/d northern crude pipeline was the target of an unprecedented bombing last week, escalating persistent threats to the strategic artery.

While the 1,100km (683mi) Norperuano pipeline has been sabotaged some 33 times since 2014, the 17 January offensive was the first time the line was bombed in the manner that routinely cripples pipelines in neighboring Colombia, according to PetroPeru.

The attack, which occurred in an isolated area at the 323km marker along the principal line, mainly affects Canadian independent Frontera's 10,000 b/d of production from block 192.

All previous incidents involved incisions to steal crude or provoke spills that local communities are then paid to clean up. The most notorious incident occurred in November 2018, when an indigenous community deliberately provoked a spill to call attention to accusations of election fraud. The protesters blocked repairs for nearly three months.

The new attack came just days after communities briefly surrounded a pumping station along the pipeline's northern spur near Andoas in the Loreto region, demanding that the government fulfill promised civil works projects.

No group has claimed responsibility for the bombing. PetroPeru stated that indigenous communities were not to blame, although the culprits have not been identified.

The company, with the support of the Peruvian Hydrocarbons Society, an industry group, is pressing the government to beef up pipeline security. The government had pledged in March 2018 to dispatch the military to protect the line, but no deployment took place. In contrast, troops were dispatched late last year to protect the privately owned Camisea natural gas and gas liquids pipeline system that feeds Peru's LNG exports.

Peru's economy and finance minister Maria Antonieta Alva told foreign reporters today that security for the northern pipeline would be included in a plan the government is developing to protect the country's strategic assets. "We recently approved a list of strategic assets. For the assets on this list, which includes the pipeline, the government will guarantee security," Alva said. She did not indicate when the list would be published or what other assets were included.

Alva also said that the ministry does not intend to increase the state's financial support for PetroPeru. The ministry is represented on the oil company's board.

The Norperuano line runs from the jungle to Bayovar, Piura, on the northern coast. The company said 2014-19 incidents along the line cost around $410mn in losses and repairs.

The pipeline attacks undermine the government's goal of boosting crude production to 100,000 b/d in the next three years, from around 60,000 b/d now.

PetroPeru and hydrocarbons regulator PeruPetro set up a joint group last year to focus on recovering the pipeline, which is critical to developing exploration blocks in Peru's northern jungle and, potentially, across the border in Ecuador.

Frontera's short-term contract for block 192 expires in early March. PeruPetro fears that the pipeline problems will thwart its effort to find a new operator.

In an operational update issued today, Frontera said its fourth quarter 2019 production at block 192 averaged 10,164 b/d, up by 56.1pc from a year earlier when the pipeline was off line. "We are in conversations with the Peruvian authorities to ensure continuity of production in the block," Frontera said.

PeruPetro president Seferino Yesquen says the block could produce 100,000 b/d on its own once areas included in an expanded concession for the new operator are tapped.

In a separate setback, PeruPetro had hoped to kick off 2020 with the 20 January concession of block 201 in the central jungle. But it did not receive any bids and scrapped the process on 17 January. Frontera, which explored the 500,000-hectare block several years ago, discovered condensate but relinquished the acreage in 2016 because of transportation challenges.

By Lucien Chauvin