Peru's state-run energy company, Petroperu, said Tuesday that it was modifying its contract with GeoPark Limited on the joint development of a promising oil block in order to win the finance ministry's approval.
The changes will lower the amount of risk Petroperu assumes in oil block 64, which holds 55 million barrels of proven and probable light crude reserves, said Petroperu President German Velasquez.
"Oil is a risky activity, and we're transferring the risk to GeoPark," Velasquez told reporters at an energy conference.
Petroperu has been waiting for the government of President Ollanta Humala to decree its approval of the contract with GeoPark since the companies struck a deal in October 2014.
The partnership gives GeoPark 75 percent control of block 64 in Peru's northern Amazon and Petroperu 25 percent.
But the finance ministry has objected to the contract because it fears it violates a 2014 law that requires Petroperu to put its resources toward a $3.5 billion refinery expansion, said Velasquez.
"Specific elements in the contract do not satisfy the finance ministry," Velasquez said, without offering details. "The goal is to modify the partnership contract to lift those caveats."
The hold-up likely means Petroperu will not return to upstream activities during the government of Humala, who once pledged to transform the company into a major energy player.
Petroperu has not produced oil in more than 20 years and mainly refines, transports and commercializes energy products.
Humala has dashed the hopes of Petroperu supporters who longed for a bigger role for the company - cutting it out of two opportunities for taking a minority stake in oil contracts this year.
Humala has said that Petroperu is not yet ready to produce oil and doing so prematurely jeapordizes public funds.
Velasquez said Petroperu and GeoPark agreed to wait for government approval until July 2016, when a new president will assume power at the end of the month.
Presidents in Peru cannot hold consecutive terms. It is unclear if Humala's succesor will heed to growing calls ahead of April elections to give Petroperu more responsibility.
Congress overrode a veto by Humala last month to clear the way for Petroperu to eventually take control of the country's biggest oil concession, block 192, which Pacific Exploration and Production Corp will operate until mid-2017.
Velasquez said that Petroperu is considering partnering with Pacific in 2017. "We have a very good relationship."
