(Reuters) – Peru’s state-owned oil company Petroperu signed a license agreement on Tuesday to return to producing crude oil, starting at one of the country’s largest oil blocks, with plans to invest $638 million in the site to develop new wells.
Petroperu will take over Block 192, located in the Amazon near the border with Ecuador and operated by Canada’s Frontera Energy Corp (FEC.TO) between 2015 and 2020. It has been inactive since then.
The agreement comes after the state oil company announced plans to return to crude oil production. A privatization wave in the 1990s left it with only its refining and fuel marketing businesses.
“This constitutes a fundamental step to strengthening the vertical integration of Petroperu,” energy and mines minister Oscar Vera said in a statement after signing the agreement, which will allow the firm to operate the block for 30 years.
The project will have an initial production of 10,000 barrels of crude oil per day, he added, with processing taking place at the new Talara Refinery, which restarted operations in early February.
The reactivation of Block 192, which produced some 8.3 million barrels of oil between 2015 and 2020, will boost national crude oil production by 25%, the oil regulator said in a separate statement.
Petroperu’s planned $638 million investment in the site will also serve to develop 20 production wells and one exploration well over the term of the contract, the regulator added.
The announcement comes despite opposition to the extraction of crude oil in the region by some of the twenty-five native Amazonian communities who live around the oil field.
They allege extraction contaminates their lands amid constant spills from an oil pipeline that carries oil from the jungle to the Petroperu refinery on the country’s Pacific coast.
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