Announcement of World Bank Lends Thirty-Two Million Five Hundred Thousand Dollars to Help Expand Oil Production in Peru on March 13, 1980

- · FOR IMMEDIATE RELEASE .Alarid Bank 1818 ~ Street, N.W., Washington, D.C. 20433, U.S.A.• Telephone: (202) 477-1234 ijANK NEWS RELEASE NO. 80/55 March 13, 1980 WORLD BANK LENDS $32.5 MILLION TO HELP EXPAND OIL PRODUCTION IN PERU Peru, one of the oldest oil producing countries in the world, will carry out a petroleum production rehabilitation project with the World Bank's support. A $32.5 million Bank loan will help finance a project aimed at an immediate expansion of production so that Peru can meet its domestic needs and maintain an exportable surplus in the medium run. The project is the Bank's first petroleum operation in Peru. With a total cost of $50.7 million, the project will also help to improve the financial situation and the technical capability of Petr6leos del Peru (PETROPERU), the national petroleum company. Established in 1969, PETROPERU now controls 100 percent of Peru's refining capacity and marke~s 98 percent of petroleum products sold in the country. Peru, Latin America's first commercial oil producer, drilled its first oil wells in 1863. ·It has recently become again a net exporter of crude oil after a long period starting in the early 1960s, when the country was dependent on imported oil to • meet part of its domestic requirements . The project is expected first to increase oil production in the short-term by an initial 19,600 barrels per day by rehabilitating some of PETROPERU's opera- tions. This will inc1ude the provision of pumping equipment to restore declining production from fields in the Peruvian Amazon jungle and bringing into production 300 temporarily abandoned wells in the north western coastal area. Seismic surveys to delineate more fully several promising estructures in the northeastern and central jungle areas and the updating and completion of a feasibility and basic engineering study for a secondary recovery project are also included. The secondary recovery project i i expected to be implemented in the early 1980s in the Brea-Parinas area, on the north coast. The provision of consultant services and training to strengthen PETROPERU financially and technically and to study overall petroleum sector investment require- ments and domestic pricing policies are also included in the project. Total incremental production as a result of the reactivation of 300 wells in the coastal area is estimated to be 3.5 million barrels. Output from the jungle fields is expected to be increased by 27 million barrels over the project's life. Since all the project's incremental production would be exported, or would substitute for imports, total foreign exchange earnings (or savings) over the next ten years are expected to be almost $780 million at current prices. • In addition, the project will lay the foundation for initiation of urgently needed exploration and secondary recovery programs . The $32.5 million loan to PETROPERU has the guarantee of the Republic of Peru. It has a term of 17 years, including 3 years of grace, with interest at 8.25% annually. NOTE: Money figures are expressed in U.S. dollar equivalents. FORM NO. 1121 (5-76) T ECHN I CAL DA T A PROJECT: COUNTRY: TOTAL COST: Petroleum Production Rehabilitation Peru $50.7 million • BANK FI NANC ING : $32.5 million for a term of 17 years, including 3 years of grace, at 8.25% interest per annum OTHER FINANCING: Petr61eos del Peru (PETROPERU), $18.2 million IMPLEMENTING ORGANIZATION: Petr6ieos del Peru (PETROPERU) Paseo de la Repdblica 3361 San Isidro, Lima Peru TELEX: 25592 or 20303 PROJECT DESCRIPTION: It consists of: (a) The installation of 35 pumps to provide artificial lift for existing wells in four reservoirs in PETROPERU's northen jungle fields; the acquisition of two maintenance rigs to service wells in the jungle area; and the carrying out of studies to improve the efficiency of exploitation of these reservoirs; (b) the installation of pumping • systems to reactivate primary production from 300 wells in PETROPERU's coastal fields; (c) updating and expanding a feasibility study for a secondary recovery project in the Brea-Parinas area on the coast; (d) 2,100 kilometers of seismic surveying in two phases and processing of the information obtained; and (e) consultant services and training to strengthen PETROPERU both financially and technically, and to study future sector investment requirements and domestic petroleum pricing policy. PROCUREMENT: Goods and services to be financed by the loan will be procured under international competitive bidding (ICB) procedures in accordance with Bank guidelines, except that certain contracts will be awarded through limited international tender from not less than three member countries of the Bank and Switzerland. These are (i) contracts for highly specialized drilling materials and surface and subsurface equipment other than pumps; (ii) the first 17 pumps, which are being financed retroactively; and (iii) processing services for seismic data. In the aggregate, such contracts will not exceed $3 million. Qualified local suppliers and those from Latin American Free Trade Association and Cartagena Agreement member countries participating in ICB will be accorded a preference representing the difference between the prevailing duty actually applicable and the duty applicable to goods imported from non-member countries, or 15%, on the c.i .f. price, whichever is lower. CONSULTANTS: About 110 man-months of technical assistance will be provided: (i) to improve PETROPERU's financial and technical capabil- ities; and (ii) to study the overall development of the petroleum sector. A feasibility study for a secondary recovery project will require approximately 200 man-months of • consultancy services. ECONOMIC RATE OF RETURN: Over 100% ESTIMATED COMPLETION DATE: 1982 - 0 -