Peru approves controversial Amazon oil contract —in wake of uprising

Peru has given the green light to an Anglo-French company to drill for oil in the Amazon—in the immediate wake of a wave of unrest over government develop plans in the region, in which at least 30 were killed. The Ministry of Energy and Mines announced late last month it has approved the Environmental Impact Assessment (EIA) submitted by Perenco for the construction of seven platforms and drilling of 14 wells in Block 67. Perenco estimates that Block 67 reserve potential is 300 million barrels of heavy crude—believed to be Peru’s biggest oil discovery in 30 years. Block 67 covers the “vacated” community of Buena Vista, in the district of Napo, Maynas province, Loreto region. While protests against the company were taking place last month, Perenco’s chairman, Francois Perrodo, met Peru’s President Alan García in Lima and pledged to invest $2 billion in the project.

Perenco admits that contamination of soil and water, and the flight of game and birds, are possible consequences of its work. These impacts have grave implications for the survival of the “uncontacted” indigenous believed to inhabit the area. More seriously, the indigenous inhabitants face the threat of contagion from diseases to which they have no immunity.

Stephen Corry, director of Survival International, responded to the announcement: “Anyone who hoped that the dreadful violence of the past few weeks might have made Peru’s government act with a bit more sensitivity towards the indigenous people of the Amazon will be really dismayed at this news. The timing couldn’t be worse—the government is trying to present a more friendly image in public, but as far as the oil companies are concerned, it looks like business as usual.” (Survival International, June 30; Diario Gestión, Lima, Living in Peru, June 26)

Perenco threatens to sue Ecuador
Perenco said July 3 it will take legal action against any firm that purchases or transports crude oil seized from the company by the government of Ecuador. The government started to seize production from Perenco and its consortium partner Burlington Resources Oriente Ltd. in March, and says the seizure and sale will continue until overdue windfall taxes of around $330 million are paid. Rodrigo Márquez, Latin American regional manager for the Perenco Group, told Dow Jones the crude has been “unlawfully seized,” and anyone who purchases the seized crude oil “is buying property that Ecuador and Petroecuador are not entitled to sell.”

In October 2007, President Rafael Correa, who was elected to a new four-year term this year, increased the state’s share of windfall taxes on oil from 50% to 99%. He then lowered the state’s share to 70% for private oil companies that agreed to sign temporary, one-year participation contracts that are expected to be changed to services contracts. The government has been unable to reach an agreement with Perenco. Perenco produces about 26,000 barrels of crude oil per day in Ecuador, operating blocks 7 and 21 in the Amazon region.

On May 8, the International Center for the Settlement of Investment Disputes (ICSID) notified Ecuador it cannot take measures against Perenco to recover the $330 million in unpaid windfall taxes until an arbitration process ends. ICSID also ordered Perenco to deposit the pending debt in an independent bank account while the process continues.

Márquez, who last week met with officials in Quito, said that the company wants to negotiate a solution, but doesn’t believe the Ecuadoran government is dealing in good faith. (Dow Jones, July 3)

See our last posts on Peru, Ecuador and the struggle for the Amazon.