South American neighbors Peru and Ecuador are on the road to opening their oil industries to more private investment.
Both are finding the process as rocky as a path over the Andes.
In Peru, for example, about 2,000 unionized Petroperu workers walked off their jobs for 2 days this month to protest the coming privatization.
Peru plans next January to sell a 60% interest in each of its two biggest refineries, the 62,000 b/d Talara plant and the 105,000 b/d La Pampilla refinery at Lima. About two dozen potential bidders have expressed interest.
Later, Peru plans to sell 60% of its Block 8 and Block 10 oil fields, a package of 21 sales terminals, and a collection of other assets (OGJ, June 13, p. 41). It also is expected to offer to lease the North Peruvian Pipeline to a private operator for 10 years.
In most of the cases, bidders will be required to make major investments to improve the assets.
Public opposition to the sales has been growing in Peru. Minority politicians have seized on the issue, arguing that the selloffs are ill advised.
Government officials reply Petroperu has been losing money for years, and the only way to obtain the $2 billion needed to modernize refineries and oil fields is to seek outside investment.
Meanwhile, foreign oil companies are increasing their exploration programs in Peru. An acreage sale next January will give them more latitude to propose blocks for new concessions.
In Ecuador, reform efforts are less ambitious but less controversial.
Reform of the hydrocarbon law last year (OGJ, Dec. 27, 1993, p. 33) enabled Ecuador's seventh round of international bidding (OGJ, Feb. 7, p. 38).
Frederico Veintimilla Salcedo, president of state owned Petroecuador, called the bidding "a bigger success than we expected."
Companies were issued eight blocks in the Amazon region, two along the coast, and one in the Gulf of Guayaquil. They pledged to spend $300 million for exploration, almost double the investment expected. In the six previous rounds, only 13 contracts were signed.
Oil companies operating in Ecuador have publicly urged the government to expand the 22 year old, 300 mile trans-Ecuadorian pipeline, which is operating at capacity. Bids were sought last October to expand the line, and seven international groups submitted proposals.
But there is strong union and political opposition to the expansion, and it has landed Energy Minister Francisco Acosta in trouble.
Congress is considering impeachment hearings against Acosta, alleging mismanagement of pipeline expansion bidding and of the seventh round of concessions.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
