The Peruvian government and communities agree to funding plan
PetroTal has announced the recommencement of oil production and operations at the Bretana oil field. The recommencement of oil production follows agreements between the indigenous communities in the northeastern region of Peru (inclusive of Loreto, where Bretana is located), Regional governments and the Central Government of Peru, that will see enhanced funding available for these regions to aid community projects.
Highlights
- PetroTal recommenced operations at the Bretana oil field on September 28, 2020, and as all seven wells continue to be gradually brought into full operation, current production is approximately 11,000 barrels of oil per day (“bopd”), approaching the pre shut down level of 11,500 bopd;
- The indigenous communities and government bodies have reached an agreement that will see increased funding for the local communities;
- Oil deliveries will commence to the Iquitos refinery immediately, and the Northern Oil Pipeline ('ONP') at the Saramuro Pump Station will be ready to receive deliveries of Bretana oil when the barges arrive; and,
- The Company’s stringent Covid-19 protocols continue to ensure that the camp remains safe and operates with minimal downtime.
Resolution between Communities and Governments
The Central Government has made three important announcements tackling the social unrest, which was exacerbated by the Covid-19 crisis. These measures will provide a long-term solution to these issues.
The first was Supreme Decree Nº 145-2020-PCM signed by the President (published August 28, 2020) establishing an investment plan to bridge the income gap among the poor indigenous communities, known in Spanish as the Plan de Cierres de Brechas ('PCB'). PetroTal strongly supports this initiative, which provides a six-year financial commitment of approx. US $1.7 billion to support development of the communities, of which US $28 million will be designated for economic development of the local communities over the next four months.
The second announcement was Ministerial Resolution Nº 268-2020-PCM signed by the Prime Minister (published September 20, 2020) establishing a working group called 'The Management Committee for monitoring interventions and outcomes for the development of the native communities and localities of the provinces under the sphere of hydrocarbon activities in the provinces of Maynas, Loreto, Datem del Maranon, Requena and Alto Amazonas, of the department of Loreto', that will decide the projects under the PCB and who would manage them.
The third announcement was a Decree of Urgency Nº 114-2020 signed by the President (published September 23, 2020) allocating approx. US $250 million5 to a list of infrastructure projects throughout the country, with US $20 million allocated to the Loreto Region where Bretana is located. This decree expedites the procurement process to ensure all the allocated funds are properly deployed to maximize employment throughout all the communities.
PetroTal acknowledges the efforts made by the indigenous communities and all levels of the Peruvian government to resolve the recent social disruption and to ensure a long-term solution is in place to minimize future disruptions. Going forward, PetroTal will continue its dedication to community support, along with focusing on sound environmental and corporate governance policies as well as maintaining stringent Covid-19 protocols to ensure that the camp remains safe and is operated with minimal downtime.
Bretana Oil Field Recommencement
With the full support from the local indigenous communities and governments, PetroTal has recommenced operations at the Bretana oil field. All seven wells have now commenced operation and are being gradually optimized for effective reservoir management. Production is currently at approx. 11,000 bopd, and expected to reach the pre shut down level of 11,500 bopd, shortly.
While production was shut in at Bretana, Petroperu used that time to carry out some maintenance work on the pipeline, which is expected to be completed on time without affecting Bretana’s oil deliveries. Similarly, with the social unrest at Bretana that originated at the pipeline now resolved, the Government expects to have the pipeline social issues also resolved in time for the pipeline to receive Bretana’s oil production. In the meantime, the Iquitos refinery operated continuously throughout the recent social unrest, thereby allowing PetroTal to deliver oil from inventory over the last month.
Liquidity Update
At September 29, 2020, PetroTal had cash resources of US $12 million, with accounts payable and accrued liabilities of approximately US $36 million, a reduction of US $14 million from the end of Q2 2020. Ongoing payments will be managed from expected oil field revenues and internal cash resources. Pursuant to contractual terms with our suppliers, approximately 30% of the amount is not due until into 2021.
Manuel Pablo Zuniga-Pflucker, President and Chief Executive Officer, commented:
'PetroTal commends the efforts of all parties in reaching a negotiated settlement that will ultimately benefit the indigenous communities, the Peruvian government, and all operating companies, including PetroTal. On behalf of PetroTal, I would like to sincerely thank the PetroTal team for their continued dedication during this period and for their contribution towards this long-term community funding solution. Our corporate commitment is to ensure all stakeholders benefit from the Bretana project, including the local communities that support our Company.'
