By Marcelo Rochabrun

NUEVO andOAS, Peru (Reuters – Peru wants to boost oil production in its Amazonian fields. Global crude oil prices are soaring due to fears about Russia’s invasion.

Block 192, which is the Andean country’s biggest – but also the most leaked – oil field, is one area that could be revived. Block 192 is located in Peru’s Amazon (NASDAQ) jungle. It was once one of Peru’s largest oil producers for several decades.

This oil also causes extensive environmental damage to the forest surrounding it, which is why pumping was stopped two years ago. Oil from hundreds previous spillages seeps into the tropical topsoil. This oil coats native vegetation and contaminates streams leading to the Amazon River.

Pilar Rengifo, a Nuevo Andoas resident and a hamlet that has 500 inhabitants, said, “Here, we all live poisoned.” A 2016 state-backed test of more than 1,138 individuals in over three-dozen oil-producing communities, Nuevo Andoas included, found that nearly half of them had elevated levels of mercury, lead and arsenic in their blood. This was most likely due to oil exposure.

Rengifo said that oil drilling is a reliable source of work. However, Rengifo told Reuters that he and other villagers support it and they would like to see Lima push harder for its return despite the risk.

Rising energy prices have altered the equation for Peru, and other countries in Latin America looking to decrease their dependence on oil from abroad. Millions of barrels have been taken daily from an already tight market by Western sanctions targeting Russia, a significant crude exporter. It’s hurting traders and farmers as well as accelerating inflation.

Peru imports around 80% of its gasoline, diesel and petroleum products. President Pedro Castillo wants to reduce this figure. Although Petroperu’s oil production has been resuming for the first-time in many decades, it still remains below 1,000 barrels per day. His administration helped to rescue Petroperu, a state-owned oil company. Petroperu was producing around 200,000 barrels daily at its maximum in 1980. This number plummeted after the privatizations led to Petroperu having to stop production and concentrate on refining, distribution, and other activities.

Castillo also wants to increase domestic production so the fuel can be “reach all homes”. Castillo threatened last year to nationalize this sector, but he has softened his rhetoric.

Eduardo Gonzalez, former Energy and Mines Minister, traveled to Houston last year to meet potential investors. He declined to identify the names. A document he presented to Reuters summarizing his pitch for reopening drilling in Block 192, and other areas of the Amazon, was shown by Gonzalez.

He told Reuters that the ideal scenario is for oil to be independent.

“THE WAR WHICH AFFECTS EVERYONE”

This is a hugely ambitious goal for Peru.

It produces just 40,000 barrels per hour of oil in the Andean region, which makes it among Latin America’s smallest oil producers.

Peru’s Ministry of Energy and Mines claims that Block 192 could produce an additional 25,000 barrels per hour.

Peru’s small oilfields make it difficult to turn a profit. Traditional communities have responded to spillage by reclaiming roads, airports, and key pipelines.

Petroperu is currently in financial turmoil due to graft accusations. Its external auditor declined to audit the 2021 financial statements. Recent credit agencies have downgraded Petroperu’s credit rating from good to poor. Hugo Chavez, the former CEO of the company has denied any wrongdoing. Francisco de la Torre (Acting CEO) stated that his main priority was to get the firm back to investment grade.

Another issue is financing. Many western lenders have become less willing to finance oil production in Amazon. This is a problem that climate scientists consider crucial to stop climate change. Peru’s rainforest area is larger than that of Brazil.

The war in Ukraine, however has brought attention to energy security worldwide. Latin American leaders are determined to protect their homegrown resources, a resource rich region.

Guillermo Lasso of Ecuador is pushing Petroecuador, a state-owned company to double its oil production. Argentina plans to construct a massive new natural gas pipeline in order to expand its domestic oil production. YPF, Argentina’s state energy company, aims to increase its oil production by doubling it in five years.

Raising output is critical “especially with the global energy crisis resulting from the war that affects everyone,” Argentina’s Secretary of Energy Darío Martínez said on March 21, when he announced that monthly oil production was at an 11-year high of 571,000 barrels per day.

Petroperu’s de la Torre stated that Block 192 is key to Peru and plans for a $5 billion expansion of the Talara refinery.

He told Reuters that Petroperu’s role today is more important than it was before the war. The price of oil is high and transporting it to the Southern Hemisphere has been difficult. Imports can be more expensive because they are higher.

BURIED OIL

According to data from the government, Block 192 is approximately 512,000 hectares or 5,100 km2 in area.

Most recently, Argentina’s Pluspetrol, and Houston-based Frontera Energy Corp (OTC) Corp were hit by environmental penalties related to oil leakage in the block. Pluspetrol resigned from Block 192 after more than a decade of operation, but the company continues to be active in Peru. Frontera’s contract was not renewed in 2020, after only five years of existence.

Pluspetrol and Frontera is Peru’s environmental regulator OEFA and its Energy and Mines Ministry have declined to comment.

In 2016, Peru’s government designated Block 192 an environmental emergency zone. According to the data compiled from Oxfam (a British charity), Peru has suffered around 1000 oil spillages in 1997.

The consequences of the actions taken around Nuevo Andoas are evident almost everywhere. Reuters visited Nuevo Andoas in February. It was 639 miles (628 kilometers) north of the capital.

An abandoned storage building was the source of a new oil spillage that led to a stream. Large plastic bags half-buried beneath the soil were used to collect oil. This was part of an attempt at haphazard mitigation.

Reporters from the area said that locals were often employed by oil companies to fix leaks. However, they did not receive any training or protective gear. Segundo Sávedra, 50 years old, claimed that this was an everyday practice.

He stated, “If your foot touches it, you will see that the oil has turned black.”

Nearly twenty-six residents were interviewed and found that they are concerned about the environment and health, but supportive of the income and jobs the industry provides.

Villager Rengifo dedicates most of her time to Bianca Rengifo (11 years old), who has severe disabilities and cannot speak or walk. Because there is no doctor in the area, Rengifo’s mother does not know what her daughter has.

Frontera’s departure has made her mother feel worse. Marcial Garcia was her husband and used to transport cargo and passengers in a community-owned transportation service. Without oil workers entering and leaving the region, such work is now rare.

She said, “It was wonderful when the oil company was here.”

‘OUR DAILY BREAD”

The oil from Block 192 is transported more than 1,100 km (684 miles) via pipeline to Talara, Peru’s Pacific Coast refinery to make gasoline and diesel.

Meanwhile, Nuevo Andoas lacks even a gas station. To the handful of people with vehicles, small variety shops sell liters.

An oil town’s lack of fuel is an indicator of Peru’s struggles to help its poorest residents. Peru is the number one producer in the world. Residents live near Peru’s mines. Peru is the world’s No. 2 mineral producer. Residents have long been agitating for more of this wealth.

Augusto Acosta has been the most prominent medical doctor in Nuevo Andoas for the past 15 years. His explanation was that the only source of medicine for patients is oil companies. However, these resources are now scarce.

Saavedra, a resident, said that he was overcome by the fumes from cleaning up oil spillages in 2016, and ended up at this clinic. Saavedra is determined to get the oil companies back, despite the dangers. Saavedra needs to work. The job paid 1,600 soles ($430 per month).

Saavedra stated, “Oil is the way we get our daily bread.”

Lot 192: Oil Curse https://tmsnrt.rs/3HRORue

Lot 192: Oil Curse (Interactive version) https://tmsnrt.rs/35ZMQin

Peru oil spills https://tmsnrt.rs/3sSFw0Y

Peru oil spills (Interactive version) https://tmsnrt.rs/3Cr0hUk

Oil price spike https://tmsnrt.rs/3wk4JTY

Oil price spike (Interactive version) https://tmsnrt.rs/3uaavFf

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