Peruvian Energy Sector Rocked by Political Upheaval

Editor’s note: This is the first in a two-part series about challenges and opportunities for geoscientists in Peru during the country’s political and economic turmoil. Part 2 will address the role of AAPG and other societies in helping students and young professionals affected by the situation.

On Dec. 7, the Peruvian Congress announced a vote to impeach President Pedro Castillo, charged with corruption. Castillo responded with a surprise televised address, announcing plans to dissolve Congress, introduce a curfew and use emergency powers to call elections for a new Congress to change the Constitution.

The speech shocked both opponents and supporters, and Congress responded swiftly with a vote to remove him from office. By the end of the day, Castillo was in police custody, and Vice President Dina Boluarte sworn in as Peru’s first female president.

It was the end of a short but turbulent term for Castillo, elected in 2021 as Peru’s first leftist candidate in more than a decade. The former farmer, schoolteacher and union leader promised to help Peru’s rural poor, who have suffered greatly from the COVID-19 pandemic and extreme drought.

On Thursday, Dec. 15, the judiciary dictated 18 months of preventive detention against Pedro Castillo for the coup attempt. The Prosecutor’s Office also maintains that the former president, accused of rebellion and two other crimes, would flee the country if he is released.

A Turbulent Political History

The recent political showdown resembled a similar crisis 30 years ago, when Alberto Fujimori, another populist outsider elected democratically in 1990, staged a coup to shut down Congress with the support of the military. Fujimori ruled the country as a dictator until 2000, when he was sent to prison. He is currently serving out a prison sentence after being charged with corruption and human rights abuses.

Castillo’s 17 months in office were fraught with political infighting, corruption scandals and high cabinet turnover. Congress attempted to impeach him on two previous occasions but lacked sufficient votes to get him out of office.

The president’s popularity in Lima declined during his first year in office, reaching 71-percent disapproval according to the latest survey, but he maintained strong support from the rural poor who, like other Latin American voters who elected leftist candidates in recent years, are reportedly fed up with inequality, high unemployment, corruption and establishment politics led by an elite political class.

Thousands of supporters took to the streets after his detention, blocking roads and airports. They demanded the resignation of Boluarte, who they call a traitor for staying in office after her former political ally was forced out of power.

At least seven people, mostly students, died in violent clashes between demonstrators and police in the first week after Castillo left office.

Peru’s current constitution, instituted by Alberto Fujimori in 1993, gives the president the power to dissolve Congress if the executive is denied confidence on two occasions. The document also gives congress the capacity to remove the president with a two-thirds majority vote.

The Peruvian Congress used the constitutional resource to remove two other presidents from power, Fujimori in 2020 and Martín Vizcarra in 2020. Pedro Pablo Kuczynski resigned before facing a similar fate in 2018.

The constitutional provisions allowing the executive and legislative branches to annul each other makes the country almost impossible to govern.

Ironically, one of Castillo’s primary campaign promises in 2021 was to reform the 1993 constitution, the document that bestowed the very powers he used to attempt to dissolve Congress.

Now, charged with rebellion and conspiracy for breaking the constitutional order, Castillo is being detained in the same prison where Fujimori is serving his sentence.

Effects on the E&P Sector

Peru’s political situation has had a devastating effect on the hydrocarbon industry, and on geoscientists working in the sector.

Image Caption

Jul Roldan at the Ausangate snow-capped mountain, in the district of Ocongate Cusco, Peru

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Editor’s note: This is the first in a two-part series about challenges and opportunities for geoscientists in Peru during the country’s political and economic turmoil. Part 2 will address the role of AAPG and other societies in helping students and young professionals affected by the situation.

On Dec. 7, the Peruvian Congress announced a vote to impeach President Pedro Castillo, charged with corruption. Castillo responded with a surprise televised address, announcing plans to dissolve Congress, introduce a curfew and use emergency powers to call elections for a new Congress to change the Constitution.

The speech shocked both opponents and supporters, and Congress responded swiftly with a vote to remove him from office. By the end of the day, Castillo was in police custody, and Vice President Dina Boluarte sworn in as Peru’s first female president.

It was the end of a short but turbulent term for Castillo, elected in 2021 as Peru’s first leftist candidate in more than a decade. The former farmer, schoolteacher and union leader promised to help Peru’s rural poor, who have suffered greatly from the COVID-19 pandemic and extreme drought.

On Thursday, Dec. 15, the judiciary dictated 18 months of preventive detention against Pedro Castillo for the coup attempt. The Prosecutor’s Office also maintains that the former president, accused of rebellion and two other crimes, would flee the country if he is released.

A Turbulent Political History

The recent political showdown resembled a similar crisis 30 years ago, when Alberto Fujimori, another populist outsider elected democratically in 1990, staged a coup to shut down Congress with the support of the military. Fujimori ruled the country as a dictator until 2000, when he was sent to prison. He is currently serving out a prison sentence after being charged with corruption and human rights abuses.

Castillo’s 17 months in office were fraught with political infighting, corruption scandals and high cabinet turnover. Congress attempted to impeach him on two previous occasions but lacked sufficient votes to get him out of office.

The president’s popularity in Lima declined during his first year in office, reaching 71-percent disapproval according to the latest survey, but he maintained strong support from the rural poor who, like other Latin American voters who elected leftist candidates in recent years, are reportedly fed up with inequality, high unemployment, corruption and establishment politics led by an elite political class.

Thousands of supporters took to the streets after his detention, blocking roads and airports. They demanded the resignation of Boluarte, who they call a traitor for staying in office after her former political ally was forced out of power.

At least seven people, mostly students, died in violent clashes between demonstrators and police in the first week after Castillo left office.

Peru’s current constitution, instituted by Alberto Fujimori in 1993, gives the president the power to dissolve Congress if the executive is denied confidence on two occasions. The document also gives congress the capacity to remove the president with a two-thirds majority vote.

The Peruvian Congress used the constitutional resource to remove two other presidents from power, Fujimori in 2020 and Martín Vizcarra in 2020. Pedro Pablo Kuczynski resigned before facing a similar fate in 2018.

The constitutional provisions allowing the executive and legislative branches to annul each other makes the country almost impossible to govern.

Ironically, one of Castillo’s primary campaign promises in 2021 was to reform the 1993 constitution, the document that bestowed the very powers he used to attempt to dissolve Congress.

Now, charged with rebellion and conspiracy for breaking the constitutional order, Castillo is being detained in the same prison where Fujimori is serving his sentence.

Effects on the E&P Sector

Peru’s political situation has had a devastating effect on the hydrocarbon industry, and on geoscientists working in the sector.

Federico Seminario Gros, Lima native and president of AAPG’s Latin America and Caribbean Region, described Peru’s political scenario in recent years as “very challenging,” both for the national oil company PetroPeru, as well as for private operators and service companies.

“E&P activity has been reduced significantly and moved to the back burner. There is a total lack of interest on the part of the government to reactivate the sector and a cold indifference from the population in the face of the crisis that affects the sector,” he said.

Seminario noted that the production of liquid hydrocarbons (oil and liquified natural gas) in August 2022 was 95 million barrels per day – 22 percent lower than 2021 levels.

“In 2022 we had eight development wells, no exploratory wells and 47 kilometers of 2-D seismic. Natural gas production remains at 1,720 million standard cubic feet per day, but liquids are declining, and reserves decrease year after year,” he said.

Seminario identified four primary factors that have led to the reduction of reserves and the fall of daily production:

  • Production blocks with expired licenses that have been abandoned by operators. Block 192 and 8 have 15 fields close together and sufficient infrastructure to restart production immediately.
  • The Norperuano pipeline, the primary vessel to carry crude oil from the Amazon jungle to the refinery on the coast, is out of service due to acts of vandalism.
  • Incorporation of new reserves has been delayed, including the discovery of the Situche field in the Marañón Basin where three wells were ready to produce oil. However, the field development project was suspended due to social and environmental protests, and the field has not yet entered into the production phase.
  • A decrease in daily production has decreased as a result of a lack of investment in drilling and workover for contracts close to their expiration date.

Seminario said Peru has just 25 development contracts and six exploration contracts in place currently.

“It is important to note the opportunity that this crisis has generated due to the large number of open areas awaiting the minds of geoscientists who want to break paradigms,” he said.

“We have an urgent need for the government to develop a plan for hydrocarbon resources and execute a strategy to carry it out. The plan must be accompanied by modern legislation that promotes investments to renew reserves and deliver the energy that Peru will need in the coming years.”

Effects on Geologists

The absence of a clear governmental hydrocarbon policy has detrimental effects on geoscientists who work in the sector.

“A large number of geologists from all disciplines have been left without work as companies have closed their exploration and production operations,” Seminario said. “The situation also has caused students to migrate to other specialties unrelated to petroleum geology.”

The situation became personal for Seminario in June 2021, when his employer closed the exploration department in Peru. He found himself without a job for the first time in three decades.

Seminario made the decision to turn disappointment into opportunity.

“After more than 30 uninterrupted years working as a well geologist, reservoir geologist, exploration geologist and in various departments, I have taken this pause as an opportunity to complete some pending tasks in my personal life and to reinvent myself,” he said.

Over the past year, Seminario carried out some pending items on his bucket list, including a hike to the Everest Base Camp in Nepal, and he enrolled in a master’s degree program in renewable energies at the University of Valencia, Spain.

He also founded his own company, Merko Energy, which provides consulting for the oil and gas industry and aims to innovate and generate new business opportunities in renewables.

Seminario looks forward to exploring new aspects of the profession he has loved since childhood.

“I discovered geology through my father who was a micro-paleontologist geologist and, without realizing it, taught me about this profession. There were many natural science books in my house, and from a very young age I read about dinosaurs, volcanoes and minerals. I remember as if it were yesterday, participating as a child in several trips organized by the Geological Society of Peru to visit the outcrops around the city, and how the geologists taught me to look for fossils by breaking rocks with my hammer. That fascinated me and marked me forever. All this makes me think about the importance of teaching geology at an early age.”

Seminario’s connection to the petroleum energy started at an early age as well. He grew up living in an oil camp in Los Organos, near the Talara basin in Northwestern Peru.

“My landscape was the well pumps in front of the desert coast and the ocean. However, being born among oil workers does not make you a geologist; it has to be your spirit and personality. I love life in the open air, being close to the mountains and the sea. I feel moved when I see an anticline folded and cut by a fault and when I behold the wonder of a quartz crystal. I believe all geologists have these characteristics in common,” he said.

Jul Roldan, AAPG Latin America and Caribbean Region delegate and Cusco native, also became a geologist because of his love of Earth sciences. When he learned about applying geology to hydrocarbon exploration he knew he had found his calling.

“I was fascinated by the high degree of specialization in E&P projects, the knowledge and the direct application of these for the management of geological models and dimensioning of projects to make them economically viable,” he said.

In his current role as exploration manager for Olympic Energy Peru, Roldan directs exploratory projects, acquires seismic information and performs volumetric calculations for portfolio evaluation. He also teaches geological modeling and reservoir engineering at the National University of San Antonio Abad in Cusco.

Turbulent Times

Roldan said the COVID pandemic set of a series of challenges for geoscientists in his company and in the country.

“In March 2020, the exploration management at my company was dismantled after a drop in activity,” he said. “Many young geologists lost their jobs. Now many of them are looking to join other fields such as mining – with great success due to their skills – but they are starting at the bottom.”

The situation for them worsened after Castillo’s ouster in December.

“Communications and transportation are affected by the protests, and you cannot travel freely as before, at least for now,” said Roldan.

But social and economic tension is not new in Peru, Roldan said, noting that the lack of consensus and constant conflict between political forces has a direct effect on the economy and the hydrocarbon sector.

“Political instability prevents the development of comprehensive hydrocarbon legislation that promotes the proper development of E&P projects with tangible incentives for the exploration and development of hydrocarbons,” he said.

“Currently the sector faces an excessive number of bureaucratic procedures needed to obtain environmental permits and to define the role of communities that often hinder the projects.”

As a result, many exploration and production projects have been abandoned, and large companies have left Peru, he said.

“There are few job opportunities in the country. Exploration activity is minimal and development projects only occur in cases where there are contractual commitments with the state. Many oil blocks are close to expiring their contractual term, so investments are not made, and development activities are minimal,” he said.

Unearthing Peru’s Potential

Roldan said that in spite of current challenges, Peru’s holds great potential for explorers.

“Peru has a long oil history, but the country is underexplored. There are many basins with little information and few drilled wells considering the geographical area here. We have proven petroleum systems and structural guidelines favorable to the accumulation of hydrocarbons, and the country should be studied further,” he said.

“Despite the political situation, Peru is one of the few countries in the region that is seeking a balance between political forces and has not achieved a polarization of economic policy to the left or to the right. Despite everything, Peru continues to grow solidly,” he said.

Roldan, AAPG Visiting Geoscientist and technical adviser to the Peru Young Professionals Chapter, said joining AAPG is a good strategy for geologists interested in working in the energy industry.

“Among the geologists in Peru who work in E&P, AAPG student and young professional chapter members from students and young professionals have a competitive profile for companies,” he said. “The training courses and academic activities organized by AAPG raise their academic level and make them excellent candidates to work in the oil companies.”

Opportunities for Geologists

Through his work as a university professor and an AAPG volunteer, Roldan is committed to helping geologists be part of the solution.

“Geologists must learn to communicate better. We must speak the same language with other professionals and with the general population, clearly transmitting our knowledge and business perspective to society so our projects are known, and their contributions recognized,” he said.

Roldan said, in addition to effective communication skills, geologists should develop prowess in economics if they want to be successful in their profession.

“We (geologists) need to learn more about risks and uncertainties and how to manage costs and budgets in an integral way so we can outline viable projects,” he said. “This allows us to better reach investors with clear numbers and scale projects appropriately.”

He noted that the need to develop economic projects extends far beyond Peru.

“This is a global challenge since easily accessible hydrocarbons have been produced already. We need to be resourceful and do more with fewer resources. We must see all projects in a complete way to find the best investment alternatives and know how to sell projects well to investors,” he said.

Seminario encouraged colleagues to turn current challenges into opportunities for self-improvement and forward progress.

“The world changed suddenly after the COVID pandemic, and today we are facing a new stage. Technology and remote work are here to stay, so adapting is a fundamental requirement,” he said.

“For senior petroleum geologists, I think one of the primary challenges is to accept this change and reinvent yourself. Students and young professionals have ample opportunities, since Peru is a country very rich in resources and there is much to do, be it in petroleum geology, renewables, mining, geothermal energy, hydrogeology, research, etc.”

Seminario is leading by example, meeting with students and young professionals in Peru and focusing on his final six months as president of AAPG’s Latin America and Caribbean Region. He strives to motivate others while focusing on his own transformation.

“The world is currently upside down and the shadow of war is affecting almost all economies. However, after the storm comes the calm. I am optimistic that the geologists in Peru will find their own areas to develop,” he said. “Opportunities are plentiful, and they’re always present. Sometimes they pass us by, and we don’t realize it, I think it’s important to pay attention, take risks, break paradigms and not be afraid of failing.”

Seminario at Everest viewpoint, Syangboche Nepal 2022

Comments (1)

Politics impacting geosciences - not only in Peru
In many parts of the world, especially in UK and Europe, there are a series of UNESCO "GEOPARKS" but not in the USA. Why? Because the previous administration decided to pull the US out of that organization. As a reminder, UNESCO stands for "United Nations Educational, Scientific and Cultural Organization" of which the USA was a founding member. That decision has had a wide-ranging negative impact on geoscience awareness and education in the USA. Yes, I realize there are notionally reasons for this withdrawal, but a more creative approach would have been to work for change from within.
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1/5/2023 6:55:33 PM

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