Peru is a more than attractive country for investment in the hydrocarbon sector. Its sustained growth of 4.5% in the 2010-2019 period, in addition to establishing it as one of the fastest growing economies in the region, has also generated an important increase in its demand for electricity, which increased at an average rate of 6% per year in the last ten years.
However, the year 2020 has been particularly difficult. The impact of the pandemic in the sector was reflected, as in many others, in significant losses throughout the supply chain.
At the end of August 2020, for example, the sector generated US$ 296 million of revenue for the Government; of which US$ 281 million were related to license contracts and US$ 15 million to service contracts. This amount was lower by 46.4% than the amount registered in August 2019, which was mainly caused by the fall in international oil prices and lower demand, as a result of the pandemic. As for the “royalty” and “excess royalty,” as of August 2020, S/. 660 million were transferred to the regions of Ucayali, Piura, Huánuco, Tumbes, Loreto and Cusco; approximately 40% less than the amount transferred in August 2019.
Despite the fact that in 2020 the national economy registered a contraction, the IMF forecasts a growth of 9% by 2021, the highest rate in South America. This is thanks to the tax and monetary policy applied by the country to contain and reverse the adverse effects generated by the pandemic. For future years, the outlook is also favorable.
This is a clear sign that hydrocarbons will continue to play a fundamental role in the economic development and competitiveness of the country. According to PERUPETRO estimates, the northern jungle has resources and reserves with the potential to generate a value of US$ 44,000 million for the country. However, it also notes that if these resources and reserves are not exploited in the next 20 years, they will remain underground without generating any revenue.
“The increasing demand for energy in Peru during the last twenty years caused by the development of mining and industrial projects, and the growth of its main cities, have allowed to better position oil, gas and electricity activities. I believe this scenario is going to evolve as the economy grows and new sources of energy are considered. For this reason, I invite investors to review the Guide and find out about the great opportunities the country has for long-term investments in the energy sector,” states David Warthon, Tax Partner of EY Peru.
This and other information of interest may be found in the “Investment Guide in Energy Projects in Peru for 2021/2022,” presented together with the Ministry of Foreign Affairs, the Ministry of Energy and Mines, PERUPETRO, ProInversión and the professional service firms EY Peru; in order to join public and private efforts to pursue a better and greater investment in our country in this important sector. The content may be accessed for free at https://www.gob.pe/institucion/rree/informes-publicaciones/1755224-peru-guide-to-investing-in-energy-projects-in-peru-2021-2022.
Likewise, the Guide has been prepared in English and seeks to provide relevant information for investors who are looking for energy projects worldwide, so it will be a valuable instrument to help make well-informed decisions for the development of projects of the entire supply chain in our country: exploration, exploitation, transport, distribution of natural gas, etc.
The publication includes a summary of the Peruvian political structure, macroeconomic profile, main indicators of economic development, business climate, business environment and its outlook for future years, geological potential, sector trends and hydrocarbon operations in the country. It also provides important information to help foreign investors understand the regulatory framework governing investment and, in particular, the legal, tax and regulatory requirements for the development of such activities in the country.