RE:Insight In six years of operation, Petrotal became the largest oil producer in Peru, with 50% of the national volume by 2023. The company, legally domiciled in Canada and with corporate headquarters in the United States, focuses its operations in Peru with the production in the Brittany field, in Lot 95 (Loreto). After six years, it plans a new exploration in said deposit, recognizing a priori the possibility of finding up to four new similar hydrocarbon deposits. In an interview with its general manager, Guillermo Flrez, learn about the perspective of this project and the long-term corporate strategy, which even includes purchases. What is the balance for 2023? It has been a very positive year. In the third quarter we had some challenges due to low river levels that prevented us from filling the barges to their maximum capacity. We were restricted in production and averaged about 11,500 barrels per day (bpd), but the second quarter was a record. What were those peaks in that quarter? We reported an average of 19,000 bpd and today almost two weeks of production above 20,000 bpd have been completed. Petrotal's production represents 50% of national production and we expect to close the year having produced just over 5 million barrels, with which we will average around 14,300 bpd for the year, growing in double digits.
We have added barges to the export fleet to sell more barrels. The fact of having had almost no stoppages due to social conflicts has helped a lot, it is a clear demonstration that the Social Fund 2.5 proposal to bring development is giving results. We give the population 2.5% of our controlled barrels, as long as there is no impact on operations. Were there also investments to increase production? This year we are going to close with close to US$ 120 million invested, and with that, in these almost six years of operation, we must have invested a total of close to US$ 500 million and that has allowed us to continue with the drilling program. Today we are drilling well 16 H, an oil producer. It is the first on a new platform and we hope to put it into production at the beginning of 2024. Projections 2024 What is the production outlook for 2024? It will be subject to budget approval from our parent company, which is on the Toronto Stock Exchange, London and in the United States. We have not yet published the budget, but we are seeing investments of US$ 140 million or US$ 150 million, and we hope to continue increasing production.
What initiatives would this preliminary capex include? The main project is the drilling of wells, each oil well is US$ 15 million, we are looking at drilling at least four wells. Then there is the expansion of the plant (facilities for oil extraction, liquid separation and water reinjection), some optimizations and the novelty is an exploratory program in Lot 95, it is to run 2d seismic in 1,200 km, which we hope to start at the end of the third quarter or beginning of the fourth quarter, depending on when we have the permit. After how long will the lot be explored? Six years old. When Petrotal acquired Gran Tierra's assets in Peru, the company had drilled the 1XD well, but had never done production tests and our first project was that, we managed to do it in just five months. Now in 2024 we plan to do seismic testing, which is part of the exploratory phase. Given the knowledge of the site, what is the expectation? There are six years of experience as Petrotal, but the technical team is very experienced, having worked in various operations around the world, with experience in the Maran basin. They consider that we could find in Lot 95 about three or four additional 'Bretaas', with which Petrotal's production could reach 70,000 or 100,000 bpd. It would be a significant leap in production… We have managed to produce about 26,000 bpd in Lot 95 in the Brittany field, we could find three or four additional similar fields. Obviously you have to invest. In Peru there is talk of mining projects of US$ 4,000 million, but this project, when you see it comprehensively, could reach those investment levels.
In what sense? In Lot 95 we are already reaching US$ 500 million (in six years), but the previous operator had invested more than US$ 300 million. If investments have to be replicated in the south of the lot, we could talk about US$ 4,000 million in the future. How many years can it take to bring exploration to a production stage? In the exploratory phase, we will start the seismic in 2024 to finish running it in 2025, then we have to analyze the data and after permits we could drill the first exploratory well that is not in Brittany by 2026. Only 2024, will production be higher than 2023? It will be higher than this year's 14,000 bpd, but there are times of drought, there are times of plant maintenance, it's not like you produce barrels all the time. The plant must be expanded to handle a greater volume of fluid, and later we will be able to maintain the average of close to 20,000 bpd. What other projects do you have? We have a project that we will implement in the first quarter of next year to generate energy for the operation, from the gas that comes from the field. The modern sustainable oil industry is a major player in energy generation. We are energy that generates well-being. The jungle is a very remote area, we had to be participants in the development.
How? We have just published our third sustainability report for 2022 and the feedback we have received is very good, with technical assistance projects, paiche production and others. We have projects such as having invested in technical files for the construction of solar panels and motors to generate solar energy. This year another 16 files for solar generation plants have been approved. Likewise, we promoted the change in the law that governed the distribution of canon in Loreto, it was approved and will be similar to other regions of the country, where the producing district will receive 10%. Today Puinahua receives 0.33% of the canon, for them it is almost indistinct. Shopping in the region What key actions are you preparing for the following years? We have defined a vision to reach a stock market value of US$ 2,000 million by 2030. Today – subject to oil price variations – we are trading at close to US$ 550 million, which is almost fourfold growth. How will it be achieved? We will not only do it with our projects organically, we will have a focus on the region, to grow through a possible acquisition, or by participating in a tender in neighboring countries. Then, in the exploratory part in Lot 95 there is the seismic project and exploratory well, and then we have Lot 107 (Hunuco), and there we are with the permits and seeing if we attract a partner to drill the exploratory well.
When shopping, do you also look at Peru? We have always been looking and we will be evaluating any opportunity that presents itself, so it could be Peru, as well as Colombia or Ecuador. The Maran basin is the same with Ecuador and Colombia. The big difference is that Colombia produces close to 700,000 bpd and Ecuador produces close to 450,000 bpd, they have been able to drill many more wells than we do in the jungle. In Hunuco, have you approached potential partners? Yes, there has been a lot of interest. The potential is very great and we have different companies looking at the project. We are managing the modification of the environmental impact study to be able to drill the exploratory well that the technical team has selected.
Would it be just oil or also gas? It should be light oil, with some type of associated gas and liquid gas. In the northern jungle, there are fields that require diluent and this light oil (from Lot 107) could help that reserve of heavier crude oil (from Lot 95) be developed. Logistics and transportation operation How does the shipment come via Brazil? Today we sell about 2,000 bpd or 1,500 bpd to Iquitos, where there is a regional refinery operated by Petroper. The rest goes via Brazil, we sell to a trader and the final market can be the Caribbean or Asia, different parts of the world, but about 90% of the production is evacuated through the Amazon to the Atlantic. nd the Peruvian oil pipeline, do you see it feasible to use it again? We have mentioned the intention of bringing crude oil to the pipeline, we hope that Petroper's technical effort and the investigation into the band called “Los Crudos” will help improve the reliability of this critical asset. It will be important to be able to develop these other fields in the future. If you produce 70,000 bpd or 100,000 bpd, you need multiple evacuation routes. We are testing an export pilot via Ecuador that we hope to complete at the beginning of next year.
What fundamentals do you see for oil in the future? The United Nations Conference of the Parties (COP) has mentioned that the consumption or production of oil must be avoided in the transition. We as Petrotal, operating with respect for the environment and a vision of sustainability, believe that this industry is a key player in this great challenge of energy transition and in the first objective of the United Nations to eliminate poverty. And is something stable expected in prices? Being a commodity, oil is obviously affected and with the world situation where unfortunately there are two wars at the same time, there is a lot of volatility. In addition, there is talk of a recession, that China is not growing as fast as expected. The US has record production, but from the latest we have seen, we consider that the price of Brent oil will fluctuate between US$ 75 and US$ 83 per barrel.