Oil: future unclear for Block 192
8 August 2015
The largest source of oil in Peru, Block 192, previously referred to as Block 1AB, still has no clear future. This matters, since it produces some 17% of Peru's crude output. Block 192 is located in the northern Amazon region, close to the frontier with Ecuador. The previous contractor, the Argentine firm Pluspetrol, was forced to withdraw earlier this year amid severe conflicts both with local communities over damage to the environment and people’s livelihoods, and with the government over making good the environmental damage arising from production since the 1970s. After much delay, the government, faced with severe unrest, went to some lengths to deal with the communities' agenda (see http://www.perusupportgroup.org.uk/article-800.html). The process of prior consultation, promised in 2012, was started. The communities insisted that a new contract bidding process could not be opened before their demands were met.
With these commitments undertaken by the government, the process of attracting new bids could start. Three companies qualified to do so: Pluspetrol itself, the Canadian Pacific Rubiales and the French company Perenco. However, by the closing date of 6 August no bid had been received. This came as no surprise with the oil price under $50 a barrel and with communities unwilling to be fobbed off about environmental remediation. Industry sources suggest that Pluspetrol may have abstained in order to get Petroperú, the state company, to negotiate directly with it.
The government is clearly anxious for production at Block 192 to continue, and it even seems possible that the recent decree prohibiting Petroperú entering into direct production may be amended (http://www.perusupportgroup.org.uk/article-820.html), though the state would need a foreign partner. Meanwhile the Culture Minister has announced that the process of consulta previa will continue, notwithstanding the lack of bids. See http://larepublica.pe/impresa/economia/93147-el-lote-192-debe-pasar-manos-de-petroperu-luego-de-reciente-fallida-licitacion.
The many months of conflict over Block 192 have seen issues of serious concern in the areas of violent conflict, human rights and environmental damage and remediation. In addition a spotlight is put on the use of prior consultation, as communities use their participation as a bargaining tool to achieve action on wider grievances. The role of the state should also be observed, as the earlier effort to take Petroperu out of direct production now appears to be significantly weakened, if not reversed. We need to keep a watch on all these points over the next months.