PetroTal restart in Peru hinges on social outlay

Canadian independent PetroTal is waiting for Peru's government to implement an accord with indigenous communities so it can reopen its 10,000 b/d block in the northern jungle.

PetroTal was forced to shut in production on 9 August, when indigenous protesters threatened block 95 in the Loreto region. Clashes resulted in three Kukama indigenous men killed and 17 others, including six police officers, injured.

In a pattern typical across South America, the protests were not targeted specifically at the company, but rather at the state to comply with a $1.5bn five-year social investment plan announced in February for communities in the northern oil belt.

PetroTal chief executive Manuel Zuñiga told Argus that the company is ready to restart production, but the decision hinges on government follow-through.

"We are waiting for guarantees from authorities to reopen. We would like to have the wells operating by the end of August, but it is up to the government," he said.

Protesters have withdrawn from the area, but indigenous leaders told Argus tempers could flare up again if nothing is done.

In the wake of the unrest, the energy and mines ministry agreed to invest $300mn in the coming months, with government approval due by the end of the month.

In a separate agreement, the government plans to transfer $54mn to a fund for environmental remediation of 30 oil sites along three river basins in Loreto.

Zuñiga cautioned that more needs to be done.

"They (government authorities) say they will invest, but in what? The only projects that are ready are the ones we have been developing with the communities," he said.

PetroTal says it has spent the past 18 months working on several social projects, from fish farming to providing water and sewage systems. It has built a community dock and installed solar panels for schools and a health clinic.

Zuñiga said the government also needs to fix the "canon" system that distributes a percentage of corporate taxes back to the communities. Puniahua, the district where the block is located, receives around 1/50 of the canon, even though block 95 produces the second highest amount of crude in the country, he said.

"If communities were receiving the canon and the state complied with its commitment, we would not have these conflicts," he said.

The block was closed from May to early July because of the Covid-19 crisis and was just returning to normal when the protests hit.

The company's fourth quarter production target for the block is 11,400 b/d, with a long-range plan to reach 24,000 b/d.

Crude production in Peru averaged 30,000 b/d in the first three weeks of August, down from 56,500 b/d a year earlier.

By Lucien Chauvin