August 21, 2015 / 11:24 PM / 3 years ago

Peru state energy firm saw more risk, less profit in large oil block

LIMA, Aug 21 (Reuters) - Peru’s state-owned energy company Petroperu opted not to take a stake in the country’s biggest oil block as expected because the short-term contract signed this week would mean more risk and less profit, the firm said Friday.

Petroperu said in June that it would likely exercise its option to take a stake of up to 25 percent in block 192 as allowed under a law designed to strengthen the company, which has not produced oil in more than 20 years.

But an auction for a 30-year concession on the block failed to draw any bids earlier this month amid slumping oil prices and thorny government talks with communities, prompting Peru to draw up a contract through direct talks with interested companies.

Canada’s Pacific Exploration and Production Corp won the right to operate the block in a two-year service contract earlier on Friday.

Petroperu President German Velasquez said the contract’s terms were not appealing.

“It left some things open, for example, who would assume environmental liabilities,” Velasquez said in an interview on Friday.

“And you’re not going to be able to take advantage of the generation of wealth as much as in a long-term contract,” he added.

Petroperu has the option to take a minority stake in oil contracts that Peru signs with private companies.

Peru’s agreement with Pacific Exploration and Production Corp, previously called Pacific Rubiales Energy Corp, comes just eight days before current operator Pluspetrol’s contract expires.

Velasquez said Petroperu still aims to return to upstream activities and would be interested in a longer-term contract for block 192 in the future.

He also said he hopes the government will soon approve its plans to tap oil block 64. The approval has been pending since October of last year.

Petroperu would control a 75 percent stake in block 64, which holds some 55 million barrels of proven and probable light crude reserves. GeoPark Limited, would own 25 percent.

Reporting By Mitra Taj; Editing by Bernard Orr

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