Peru has opened its first round of public competitive bidding for exploration blocks (40675 bytes) under a regime put in place by its 1993 hydrocarbon law. The round is the latest step in a campaign to boost the countrys economy by expanding domestic energy supply. State owned Perupetro SA included in the countrys first public tender five frontier tracts covering more than 6.9 million acres in the Ucayali basin. The basin covers more than 25.9 million acres in Perus central jungle. Previous exploration within the tracts on offer involved a total of 3,950 line km of seismic surveys. Drilling has been limited to only three wells on one tract. Peru will award each tract to the company or group offering the highest weighted royalty. Royalty rates will vary, depending on an R factor, defined as the ratio between accumulated income and costs. Perupetro Chairman Alberto Bruce Caceres said minimum royalty rates are expected to range from 15% to more than 30%. As a precondition for bidding, companies must buy $3,000 packets describing bidders qualifications, the rounds bidding procedure, and the model contract governing exploration and exploitation licenses. Optional packages of data on each block also are available from Perupetro, with prices ranging from $14,000 to $18,000. Perupetro plans to open qualified bids Dec. 11 and announce winning bids before the end of that month. The company was created in November 1993 by Perus new hydrocarbon law to:
- Promote oil and gas exploration and development.
- Negotiate and sign upstream petroleum contracts on behalf of the government.
- Supervise upstream petroleum activity and act as a liaison between contractors and government agencies.
The setting
Perupetro data show the Ucayali basin is characterized structurally by anticlines running parallel to the Andean belt. Blocks 79, 80, and 81 lie in the western part of the basin, contiguous to the edge of the Sub-Andean belt. The tracts together cover more than 3.8 million acres in an area with extensive geologic folding, faulting, and saline tectonism. Blocks 82 and 83 cover a combined 3.1 million acres in the southeast end of the basin, where less intense tectonic activity created softer folds. Six decades of exploration have yielded seven commercial strikes in the Ucayali basin. Agua Caliente, Maquia, and Pacaya fields, east and northeast of Block 79, produce light oil. Aguaytia, which lies east of the line separating Blocks 79 and 80, as well as San Martin, Camisea, and Mipaya fields, south of Block 82, have mainly gas and condensate potential. Camisea and San Martin are Perus biggest fields. Perupetro estimates combined reserves of Ucayali discoveries at 11 tcf of gas, 750 million bbl of natural gas liquids, and 35 million bbl of oil. The company pegs Ucayalis potential reserves at 26 tcf of gas, 1.5 billion bbl of NGL, and 1 billion bbl of oil. Peruvian officials say the geological framework of Blocks 79, 80, and 81 is similar to Camiseas. As a result, they expect chances to be better for finding hydrocarbons on those tracts. By comparison, Blocks 82 and 83 are thought to have more chance of containing oil migrated from Paleozoic and Triassic-Jurassic source rock to the west and south.Model contract terms
Acreage included in the tender is to be awarded through licenses between Perupetro and a contractor or contractor group.Tract winners will own produced hydrocarbons and pay a cash royalty to the state based on production volume. Contractors also must pay income tax of 30% and a value added tax of 18% that may be passed on to end users. However, Perus new hydrocarbon law exempts oil and gas exports from all taxes and does not require contractors to pay signing or production bonuses. Perupetro and the contractor or group will sign an exploration-exploitation contract for a period of 30 years for oil discoveries. The term for nonassociated gas or nonassociated gas/condensate discoveries is 40 years. Peru is to allow extensions of as long as 5 years for contractors to develop pipeline systems to transport production of otherwise noncommercial oil discoveries. The country will allow as much as an extra decade for contractors to develop markets and infrastructure for nonassociated gas and gas/condensate discoveries. The license contract includes an exploration phase lasting 7 years from the date of signing. Perupetro divides the exploration phase into six parts, including one 2 year period and five 1 year periods. During the first 2 years, contractors must conduct seismic surveys. At least one wildcat must be drilled in each subsequent year-long exploration period. Contractors may end the contract after fulfilling work requirements of any exploration period.
Bidding procedure
To bid for acreage, a company or group is required to meet financial and operating requirements. Companies or groups may bid for one or more tracts. Perupetro requires a $200,000 bank bond to support each bid. To bid for one tract, a bidder or bidding group must submit proof that at yearend 1994 its assets were valued at $1 billion or more, proved reserves were estimated at 75 million bbl of oil equivalent (BOE) or more, and production amounted to 50,000 BOE/day or more. To bid for more than one tract, these requirements must be satisfied:- or two tracts, proof of at least $1.4 billion of assets, 105 million BOE of reserves, and 70,000 BOE/day of production.
- For three tracts, $1.8 billion of assets, 135 million BOE of reserves, and 90,000 BOE/day of production.
- For four tracts, $2.2 billion of assets, 165 million BOE of reserves, and 110,000 BOE/day of production.
- For all five tracts, $2.6 billion of assets, 195 million BOE of reserves, and 130,000 BOE/day of production.
