Company – On recordThis profile is no longer actively maintained, with the information now possibly out of date
Ryan Brightwell, BankTrack
Giulia Barbos, BankTrack
Moira Birss, Amazon Watch
Mary Mijares, Amazon Watch
Why this profile?
As the world’s largest rainforest, the Amazon is known as the “lungs of the Earth.” However, exploitative extractive companies such as Petroperú, continue to operate in the Amazon basin despite severe social and environmental consequences. Petroperú’s operations have devastating effects on biodiversity and the climate, impacting local Indigenous peoples and their livelihoods. As a result, Petroperú faces widespread opposition from communities and civil society groups, both in Perú and abroad.
What must happen
In line with the Paris Agreement goals, banks and other financial institutions should not provide any new financing for Petroperú while it continues to seek to expand oil and gas operations. Financial institutions should also adopt and strengthen policies mitigating abuses on Indigenous rights, such as Free, Informed, and Prior Consent (FPIC).
|Sectors||Oil and Gas Extraction|
Petróleos del Perú (Petroperú S.A) is a state-owned company under private law belonging to the Peruvian State since 1969. It has been listed on the Lima Stock Exchange since 2010.
Petroperú is a state-owned company involved in the exploration, refining, and distribution of oil and gas. Its headquarters are in Lima, Peru.
Petroperú operates in the midstream business, transporting crude oil from the Peruvian Amazon to the coast through the North Peruvian Pipeline. It is also active in the downstream business, refining and commercializing oil derivatives. This includes operating Perú's second biggest oil refinery in Talara, which recently underwent a major modernization program. Since 2021, the company returned to the upstream business, and restarted oil production at the Block I field on the North Peruvian coast. In addition, the company is seeking to operate other blocks, including Block 64.
Impact on human rights and communities
North Peruvian Pipeline: The pipeline constantly leaks, which has caused innumerable social and environmental damages. This situation has led to tense relationships with the Indigenous communities opposed to oil drilling on their land and are forced to live alongside the pipeline. These communities actively protest and seek legal action, creating stoppages and a never-ending barrage of claims against the company.
Block 64: Indigenous communities impacted by the possible exploration of Block 64 – the Achuar People of the Pastaza River and the Autonomous Territorial Government of the Wampis Nation – which Petroperú is seeking to operate soon, see the company as a harmful operator that will cause similar environmental impacts as those associated with the North Peruvian Pipeline.
Block 192: Communities impacted by operations in Block 192 have accepted oil operations after years of complex negotiations over liability remediation, health care, basic services, and damage compensation. Their expectation is that the Peruvian State will remedy the environmental liabilities left by the previous operators. However, remediation is far from being completed since no operator seems to want to be in charge of cleaning up costly environmental liabilities. The former operators of Block 192 had disagreements with the communities and environmental regulators about who should remedy the environmental liabilities left by the previous operator.
Additional Blocks: Currently, the Peruvian government is advocating for other blocks located on the Peruvian coast and the Amazon to be operated by Petroperú, once their respective concession contracts with other private operators end, between 2023 and 2028. All of these future blocks are in a similar situation as Block 192, meaning they have unresolved environmental liabilities without a willingness on the side of current operators to assume these liabilities. Under this situation, Petroperú will be potentially assuming responsibility for the environmental impacts on those blocks.
For sources and further information, please see Amazon Watch, "The Risks of Investing in Petroperu", Fall 2022
Impact on climate
The oil and gas industry is a major source of pollution in the western Amazon. Under these circumstances, the blocks that Petroperú intends to operate – 192 and 8 located in Datem del Marañón, Loreto – have an unresolved history of contamination. Since 1997 there have been 422 spills in this region. In the same period on the North Peruvian coast, close to the Talara Refinery, there have been 404 spills.
Similar circumstances are present in Blocks 192 and 8, and will probably also occur in the other blocks that Petroperú intends to operate in the future on the North Peruvian coast. In addition, the operations of Petroperú in the Peruvian Amazon have caused long-term environmental liabilities, affecting the surrounding communities that depend on nature to survive. Mainly, the operation of the old and deteriorated North Peruvian Pipeline caused more than 94 oil spills between 2001 and 2019. Despite this situation, Petroperú continues with operations that have cost the company approximately $4.3 million dollars just in remediation of environmental liabilities.
Impact on nature and environment
The oil and gas industry in particular is a major driver of deforestation in the western Amazon, where oil companies often are the first to cut down trees in order to carve roads into the rainforest. Industrial activities such as oil and gas drilling in Peru, driven by Petroperú, undermine biodiversity that’s essential for maintaining healthy ecosystems, providing fresh water, pollination cycles, soil fertility, and food production, as well as protecting against the spread of zoonotic illness and species extinction. The loss of biodiversity, coupled with constant pollution and deforestation, directly affect Peruvian communities and Indigenous groups living in voluntary isolation. Biodiversity is also inextricably linked to climate, such that good functioning of both is required for our quality of life.
Impact on pandemics
After the departure of Geopark from Block 64 in 2020, the block has been under the administration of Perupetro (the Peruvian oil licensing agency), and the license of operations under Petroperú (the state-run oil company). In February of 2022 – with the ongoing COVID-19 pandemic – Perupetro organized a “community gathering” to introduce the new operator Petroperú to the communities potentially affected by its operations in Block 64. Since Perupetro went against government advice to not to carry out face-to-face consultations to limit the risk of contagion, the Achuar and the Wampís Indigenous peoples denounced Perupetro for putting their lives at risk.
Allegations of corruption
Petroperú’s high-level executives are politically appointed. This situation represents a risk for investors because Petroperú’s corporate governance and administration depend on the government in power. Allegations have often been made involving the misuse of resources and corporate relationships involving officials accused of or investigated for corruption.
In fact, Petroperú has a history of corruption scandals and crises due to the mismanagement by these high-level executives. The government of current Peruvian president Pedro Castillo has been no exception. Over the past months, Petroperú has entered into a crisis precipitated by a corruption scandal involving President Castillo, the President of the Board of Directors, and the Chief Executive Officer, which catalyzed the departure of key high-level executive managers and the financial collapse of the company.
Petroperú’s mismanagement due to the poor selection of high-level executives has plunged the company into one of its worst financial moments. Petroperú is submerged in a financial hole caused by its over-indebtedness due to the modernization of the Talara Refinery coupled with very little crude oil production. Under the political appointees of President Castillo, Petroperú has shown very little financial transparency, leading to the downgrading of its credit rating by S&P and Fitch. Poor governance and little transparency represent a financial risk for investors.
Commercial banks are financing Petroperú via corporate loans, project finance and underwriting services. See below for more details on which banks are involved.
2022-10-24 00:00:00 | 2022 List of Operations
2022 List of Operations
- Talara Refinery Modernization Project
- North Peruvian Pipeline
- Block 64 (License to operate)
- Block 192 (License to operate)
- Block I (License to operate)
Potential future operations
- Block 8 (Suspended)
- Blocks II, V, VI_VII, X, XV,Z-2B (Blocks with expiration dates)