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Boston, MA -- (SBWire) -- 11/04/2013 --Opposition from environmentalists and the indigenous population, as well as guerrilla attacks on Peru's energy infrastructure have encouraged us to temper our optimistic stance on the country's hydrocarbons sector to a certain extent. That said, we still retain a positive view overall, forecasting that oil and gas production will expand noticeably over our forecast period given the underexplored nature of the energy sector and one of the more favourable business environment's in the region.

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

- We see Peru's oil demand, which averaged around 171,700 barrels per day (b/d) in 2012, as set to rise steadily throughout the forecast period, expecting it to reach 188,200b/d by 2017 and hit 207,800b/d in 2022. Meanwhile, total oil production should continue to expand over the next decade as well, from around 160,400b/d in 2012, to 178,500b/d in 2017 and 225,200b/d in 2022, implying that by the end of our forecast period, Peru will have switched from a net oil importer, to a net exporter. This will be driven in large part rising natural gas liquids (NGL) production from the Camisea field and surrounding area, but we also see upside potential for crude over the long term, noting Gran Tierra's promising Bretana Norte well, which could hit peak production of 40,000b/d in 2020. Indeed, combined with further exploration, this suggests we could see a reversal of crude's downward output trajectory.
- That said, while we continue to forecast steady growth for oil production, recent news regarding Peru's 2013 licensing round suggests some downside risks. On 31 May 2013, Peru announced the opening of a bidding round for nine offshore oil blocks - the first offered since 2010, in some of the country's most underexplored acreage. According to government officials, the round was expected to attractive investments at a minimum of around US$450mn, with ExxonMobil and Chevron among the 20 companies which expressed interest in the blocks according to the Peruvian officials. However, it has been recently announced that the deadlines for the round have been pushed back by a month due to underwhelming interest. While we believe that there may have been greater take-up of the country's onshore blocks and there had previously been indications that the government was looking to offer such concessions, none were included in the round due to the need for further consultation with the indigenous population. The more tepid than expected interest in the country's offshore blocks, and the slow process under which onshore blocks can be offered, could slow oil production.

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