Ipo For Peru’s State Oil Firm May Have No Takers

Government must give up its majority stake in Petroperu to attract investment needed to modernize creaky state oiler, experts say.

Published by Anadolu Agency Nov 5.

Experts on Tuesday criticized Peru’s retention of its controlling stake in the state run oil firm Petroleos del Peru SA, or Petroperu, as it plans to sell shares next year.

The flotation of up to 49 percent of the company’s stock on Lima’s main bourse could be brought forward to the second quarter of 2015, an energy official told the media Monday.

Lawmakers approved privatization measures last December as the government bid to modernize the 45-year-old firm following a model used by Brazil and Colombia’s state oilers.

But a government majority stake would keep it vulnerable to interference and would be unattractive for investors, hobbling its aim to make it one of Latin America’s top firms, oil and gas experts warned.

“I don’t see a single private corporation investing money so that its sales are managed according to political criteria,” said Cesar Gutierrez, director and consultant at Utilities Peru. “The initiative to sell shares is good, but it shouldn’t be less than 51 percent.”

Emilio Zuñiga was more direct. “I don’t believe institutional investors will be willing to buy these shares,” said the vice president of Latin Pacific Capital S.A.

The initial public offering helps Petroperu to keep up with the Andean county’s rising energy demand and access capital markets.

In October, it said it would produce oil for the first time in decades through a minority stake in an oil block controlled by GeoPark Ltd.

Once responsible for virtually all production in the 1970s and 1980s, though little, today Petroperu is involved mainly in the sale of and refining hydrocarbons. Most of its assets were privatized in the 1990s.

After a decade of decline, Peru will produce about 67,000 barrels a day this year, Gutierrez said. The government has set a target of 100,000 barrels a day within five to 10 years.

As part of President Ollanta Humala’s energy strategy, Peru is investing $3.5 million in its Talara refinery (pictured) run by Spanish firm Repsol on the north Pacific coast. It aims to boost crude production by 50 percent.

“Talara is not a profitable business,” said Zuñiga, adding an investor wouldn’t risk billions to become a partner without majority control.

The initial public offering moreover was “premature,” he said, adding that Petroperu’s best strategy is to forge “private partners that can be vigilant in terms of intervention of government in company policy.”

Peru aspires to replicate injections of private capital made in Brazil’s state energy giant Petrobras in 2010 and Colombia’s Ecopetrol in 2007, which subsequently boosted stock market values and profits.

Despite the outlook for investors, the China National Petroleum Company may be interested as the main agent in Peru’s hydrocarbons market and with oil blocks near the Talara refinery, Gutierrez said.

Natural gas production is set to rise with the expansion of the country’s main pipeline, which connects Peru’s Camisea gas fields in the jungle to the Pacific coast.

Petroperu had a net income of $13.5 million in the second quarter of 2014, up from $10.8 million in the previous quarter.

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