Petroperu fined record US$25 million, while battle builds over future oil contracts

20 October 2019

The long-running saga over the impacts of successive oil spills in the Peruvian Amazon on the environment and indigenous communities seems to have entered a new phase. While the OEFA announced fines against the state-run oil company, its president announced significant tax and other incentives to bring in private investment.

OEFA, the state environmental monitoring authority, has announced that it was levying a fine of 83 million soles against Petroperú because of its “administrative responsibility” for oil spills from the Northern Peru oil pipeline in the Chiriaco and Morona rivers in 2016.

At the same time, the National Mining and Petroleum Association (SNMPE), a powerful lobby group, has demanded that the government put an end to indigenous occupation of an oil pumping station.

Meanwhile former congressman Manuel Dammert has revealed that the president of Petroperú, Seferino Yesquén, had committed “treason” by announcing that all existing oil contracts will be extended indefinitely and royalties drastically reduced.

In February 2016, the Instituto de Defensa Legal (IDL), a legal watchdog, presented an environmental claim against Petroperú to OEFA. It did so on behalf of the indigenous regional organisation (ORPIAN-P) and the Wampis autonomous territorial government. The Awajún and Wampis indigenous peoples have been affected by spills from the pipeline owned and operated by Petroperú.

After a lengthy administrative process, OEFA emitted Resolution No. 1060-2019-OEFA/DFA on 17 July ordering Petroperú to pay a fine equivalent to US$25 million for oil spills affecting the health and the environment of the communities along the Chiriaco and Morona rivers. 

This precedent-setting decision redefines the narrative (discussed in previous PSG newsletters) concerning who is responsible for the oil spills: as yet unidentified “saboteurs” or the oil company for not maintaining the pipeline.

After a detailed fact-based study and analysis, OEFA’s decision finds the oil company responsible for environmental and human impacts because of its failure to maintain the pipeline. In OEFA’s words, “the real damage to the health of persons, both at the level of their physical wellbeing and their mental and social situation has been fully accredited”. This decision breaks through the wall of immunity which oil companies have enjoyed up until now and opens the way for affected communities to sue for compensation. 

To add salt to Petroperú’s wounds, on 11 October, the indigenous Saramuro Defence Front occupied oil pumping station No. 1 and demanded the immediate suspension of all oil flows. 

In response, Petroperú suspended activities in the station and evacuated its personnel, leading the SNMPE to issue a statement claiming that “It has now become a custom or modus operandi in the country for attacks and hostile actions to be made against production units in the hydrocarbons sector to pressure and blackmail the Peruvian state”. It noted that this was the third occupation of an oil pumping station this year without those responsible having been identified or punished; it demanded that “order be re-established and that the functioning of the oil production unit be guaranteed”.

Finally, on 11 October, former congressman Manuel Dammert from the Nuevo Perú political grouping accused Petroperú’s president and the government of “treason” for announcing that private oil contracts would no longer revert to Petroperú when they expire but could be extended indefinitely. Furthermore, royalty payments, currently between 30% and 50% would be reduced to only 5%. In the case of Block 192, currently operated by Frontera Energy, whose contract is due to expire on February 28, 2020, the royalty payable would be reduced from 16% to 5%.

Dammert claimed that, as a result of these measures, Frontera Energy would become the new IPC (International Petroleum Company), the oil company expropriated by the Velasco government in 1968 within a week of taking power. It was this that gave birth to Petroperú.

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