• 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. 

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A child plays around the common yard in the Kukama indigenous community of San Pedro in the northern Peruvian Amazon. The region is marked by oil operations, primarily operated by state-run company Petroperú.

Photo: Caroline Bennett, Amazon Watch

For sources and further information, please see Amazon Watch, "The Risks of Investing in Petroperu", Fall 2022

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.

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An oil spill flows down Chuuntsa Creek in Oil Block 1-AB, in the Peruvian Amazon..

Photo: Amazon Watch.

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. 

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Oil sheens on the surface of the Marañón River in the northern Peruvian Amazon. Within six months of 2013, five separate spills resulted from breaks in Petroperú’s North Peruvian pipeline. The company has declared the site “remediated.”.

Photo: Caroline Bennett, Amazon Watch

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.

Financial risks

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.