Peru cuts gas reserves, CNPC block on hold

A delayed pipeline project has stymied development at block 58, resulting in the downgrade to the country's reserves

Peru's energy ministry has reclassified natural gas reserves at Chinese state-owned CNPC's block 58 from proven/probable to contingent, resulting in a reduction in the country's overall gas resources.

Proven/probable reserves are classified as those that will be available within a five-year timeframe or by 2022. CNPC had been expected to develop the central jungle block, which holds an estimated 3.9 trillion ft³ (110bn m³), by 2021, but progress depends on a stalled pipeline project to carry gas from the block and surrounding acreage to the coast. CNPC did not respond to requests for comment.

The changes at block 58 have resulted in Peru's proven gas reserves falling to 12.87 trillion ft³ at the end of 2017, down by almost a fifth from the end of 2016. Of the proven reserves, 96pc are in blocks 56, 57 and 88, with 3pc in onshore blocks along the northern coast and 1pc in the northern jungle.

The $7.3bn, 30-year contract to build and maintain the pipeline was awarded in 2014 to a consortium headed by Brazil's Odebrecht. But the project became ensnared in a corruption scandal involving Odebrecht and other Brazilian construction firms and was annulled in January 2017. Lima has yet to decide on its future and is reviewing three options, including the original route, but it is not expected to make a decision until later this year.

CNPC's $2bn development plan for block 58 is not feasible without the pipeline infrastructure. An existing pipeline that serves the adjacent blocks 56 and 88, which form the Camisea project operated by Argentina's Pluspetrol, and block 57, operated by Spain's Repsol, is already running at capacity.

The government forecasts that gas production will rise to 1.45bn ft³/d (15bn m³/yr) in 2022 from 1.3bn ft³/d in 2019, despite the block 58 reclassification. Most of Peru's gas is exported as LNG.

Peru pipelines