Sunday, October 24

Peru Minister Sees Win-Win Deals Ahead of Gasfield Renegotiation

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(Bloomberg) — Peru’s new left-wing government is taking a pragmatic, consensus-building approach in its dealings with energy and other industries as it seeks to address inequalities.

At least that’s the view of Energy and Mining Minister Ivan Merino. His conciliatory comments come after tensions spurred by Prime Minister Guido Bellido’s threats to nationalize Peru’s biggest gasfield and take a step toward dissolving congress in the politically-volatile nation.

According to Merino, there may be differences in form but not in content within the government. Amid all the political noise, Bellido, President Pedro Castillo and Merino are all aligned in terms of policies, he said.

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Those policies — including bringing down gas prices and protecting national interests — have raised concern among investors and producers. But there’s also common ground between authorities and the hydrocarbons sector, including “points of agreement” with Camisea gasfield operator Pluspetrol SA, Merino said after sitting down with the industry association. The government has called an Oct. 6 meeting with Pluspetrol to renegotiate Camisea terms.

“We are quite pragmatic,” he said in an interview in Lima. “One thing is what I want and another thing is what can be done. There is a legal framework.”

Without offering details of what changes the government is seeking at Camisea, Merino said companies in Peru generally are on board with a new social approach. There are win-win agreements to be made, he said.

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The government plans to boost state-owned Petroperu’s participation in hydrocarbon exploration and production, and is looking at different financing mechanisms to that end, Merino said. The idea is for Petroperu to team up with other companies in new blocks, he said.

Regarding plans to overhaul mining legislation, Merino said the government is taking a pragmatic approach, reaching out to stakeholders for input before moving ahead.

Before June’s run-off election, Castillo’s Free Peru party raised the possibility of introducing a new tax on mining sales, similar to a bill moving through Chile’s congress. But after the election, the government focused discussions on raising more revenue through the current tax system on operating profit as a way to maintain competitiveness and protect smaller, less profitable mines.

The government is preparing to request so-called legislative faculties for a broad tax reform that would allow it to make further changes unilaterally. Lawmakers typically grant such faculties, partly because it protects them from any political blowback. But the chances of securing them have taken a hit after Bellido threats.

The fact that the government lacks a majority in congress also means the tax debate will be long and public, said Victor Gobitz, head of Peru’s Institute of Mining Engineers. Any changes can only be implemented from next year.

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