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Analysis: Peru's oil draws Indian interest

disclaimer: image is for illustration purposes only
by Carmen Gentile
Miami (UPI) Jul 9, 2008
India's Reliance Industries Ltd. -- a leading South Asian energy firm -- has signed a joint agreement with Peru's state oil company to explore for oil and gas in the South American country.

The deal, signed earlier this week, sought to formalize a partnership that was months in the making, according to Peruvian energy officials, and adds another developing nation to the roster of countries Reliance is courting to meeting India's growing energy demands.

"We'll be formalizing the agreements reached these past weeks, and in the coming days we'll provide details of the joint exploration venture in areas that hold oil and gas potential," Petroperu President Cesar Gutierrez said Tuesday.

The Indian-Peruvian alliance is believed to have its sights on 22 hydrocarbon exploration blocks set to be auctioned in September, the Indo-Asian News Service reported Tuesday.

The new RIL-Petroperu deal is the latest effort by South Asia's most prosperous energy firm to acquire new rights to yet untapped oil and gas deposits in Latin America.

In April, RIL signed a deal with Pan Andean, a U.K.-incorporated oil and gas explorer and producer in Latin America, for a 90-percent stake in Block 141 on the Peruvian shore of Lake Titicaca.

The deal marked RIL's second foray into South America, with the Indian energy firm developing two blocks in Colombia.

The block is still in the exploratory stage and subject to the approval of the Peruvian government, which in recent years has been courting more foreign oil firms than any other country in South America.

"What differentiates Reliance so far in its international effort, compared to other Indian players, is the fact that they have looked at building an 'exploration' portfolio and have not yet bought into producing properties -- this is largely guided by the need to own the project from the very start," Gauri Jauhar, an energy analyst with PFC Energy, told United Press International.

While nearby Venezuela and Bolivia have been imposing more restrictions on foreign companies operating in their countries, Peruvian President Alan Garcia has sought to open his country to various newcomers.

Garcia has said he hopes the oil and gas industry in Peru would attract some $3 billion in foreign investment and create thousands of jobs by the time his term expires in 2011.

So far, some 80 exploratory contracts have been awarded and at least two dozen blocks have been auctioned off in 2007, with 16 more available this year.

Amid efforts to draw more investors to Peruvian petroleum, energy officials there said they still want a third of its oil to come from Venezuela, UPI reported in November 2007.

Petroperu announced in April it would rely on Ecuador and Venezuela each for a third of its oil imports, and get the remainder from the spot market.

Petroecuador and Petroperu, the two countries' state-owned firms, reached a deal and have started trade.

But Petroperu and PDVSA, Venezuela's state oil arm, have tossed agreements back and forth on pricing formulas, and negotiations are not making progress.

The move is intended to keep the cost of oil supplies down, Gutierrez said, by dealing directly with the two countries and cutting out a third party.

While Garcia and other Peruvian leaders tout expansion of foreign petroleum investment as the answer to the country's poverty, critics contend the president has done so at the expense of the country's shores and Amazon rainforest.

Environmentalists also contend Peru's indigenous population, some of whom have never had contact with the outside world, is being threatened by the encroaching oil and gas developers seeking new deposits.


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Coalition holds Gulf exercises to protect oil installations
Manama (AFP) July 8, 2008
US and allied navies on Tuesday wound up exercises in the Gulf, the US Fifth Fleet said, as Iran warned it would strike American interests in response to any attack over its nuclear programme.

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