New Market Study Published: Peru Oil & Gas Report Q2 2013

From: Fast Market Research, Inc.
Published: Tue May 14 2013

Government efforts to better protect Peru's energy infrastructure from guerrilla attacks are critical for continued growth of the energy sector. We have consistently highlighted the political and security risks affecting the country's strategic energy and mining sectors, including the enduring presence of left-wing rebel groups. Despite this, the underexplored nature of the energy sector, combined with an increasingly attractive business environment for foreign investment, creates further upside risk to our forecasts. It also supports our view that Peru will remain one of the most dynamic economics in Latin America over the forecast period.

The main trends and developments we highlight in the Peruvian oil and gas sector are:

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* We are forecasting that oil production in 2013 will average approximately 174mn barrels per day (b/d). Furthermore, Peru's net oil import burden will continue to shrink over the medium term, as production ramps up much faster than consumption is forecast to increase. Indeed, we forecast oil production to increase nearly 25% between 2011 and 2015, with production exceeding 190mn b/d at that time. We see production continuing to increase until the end of our forecast period, with production beginning to modestly slip by 2019.
* The outlook for the country's gas sector is solid, and particularly over the short term. Indeed, production increased by 57% between 2010 and 2011, with our estimate for 2012 production estimating another 4% increase to just over 11.81bn cubic metres (bcm) of gas. Growth will remain strong for the next several years, although the pace of growth will begin to slow by the end of the decade. By 2017, production should reach approximately 15.8bcm of annual production. Gas consumption, meanwhile, is expected to grow steadily, rising from 6.11bcm in 2012 to 8.25bcm by 2017.
* In terms of oil exports, its theoretical net import burden will fall to its lowest level in 2016, with an import bill of only US$29mn, a steep fall from 2011's import burden of nearly US$1.5bn. Thereafter, the higher rate of oil consumption relative to production growth will see the country's oil import bill exceed US$2bn at the end of our forecast period in 2022. The country will remain a significant exporter of liquefied natural gas (LNG) throughout the forecast period, and by 2017 Peru's gas exports are set to yield some US$3.5bn.
* Petroperú's President Humberto Campodónico has confirmed his company's intention to resume oil production for the first time since the 1990s, as well as to list 20% of its stock on the Lima bourse. With primary interests in the country's midstream and downstream segments, the addition of upstream exploration and production (E&P) activities will create a more vertically integrated oil and gas company. Due to the growing prospectivity of the country's energy sector, the timing is right for the state-owned company to regain a slice of the action.

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