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BPZ Energy Exploring In Peru

Posted: Aug 20, 2009 10:39 AM by Eric Fox

Tickers in this Article: PBR, TLM, REP, BPZ

Although Brazil and Venezuela are the two main countries that energy investors think about when discussing oil and gas resources in South America, there is ongoing exploration in other countries on that continent as well. The world will need all that it can get as the emerging economies demand its share.

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BPZ Energy (NYSE:BPZ) is a small capitalization exploration and production company exploring in Peru, an area not generally known for its oil and gas resources. Despite this, BPZ Energy is progressing in onshore and offshore areas where it believes that resources can be found. BPZ Energy has interests in four blocks totaling 2.4 million acres. Three of these are onshore and one offshore.

The Prospects
Block Z-1 is located offshore Peru, and 18 wells have been drilled here by previous operators in the five fields that are in this block. The area is relatively shallow at an average depth of only 200 feet. In Block XIX, BPZ Energy has 473,000 on shore acres, where it estimates that 170 million barrels of oil and 1.7 TCF of natural gas are present.

Blocks XXII and XXIII are highly prospective according to the company and BPZ Energy is conducting seismic surveys to determine its potential. Peru is actively moving forward with its development and has signed a total of 92 contracts with outside companies to develop different blocks. The latest batch was signed in June 2009, and was valued at $650 million.

The Competition
Most of the companies involved in Peru are large integrated oil companies. Repsol YPF SA (NYSE:REP), the large Spanish company is involved in a project in the Camisea Field, where it has a 10% interest. The natural gas from this field is being supplied to a newly constructed Liquefied Natural Gas (LNG) plant being built. The facility is expected to be online in 2010.

Petrobras (NYSE: PBR) is also active in Peru. The company signed a ten-year deal in 2006 on a block in the north of Peru, and has interests in several other exploration zones as well. Talisman Energy Inc. (NYSE:TLM) is another company with interests in Peru. Talisman Energy has 4.5 million acres in its portfolio, and is currently concentrating on a light oil discovery in Block 64.

The Bottom Line
Exploration in frontier areas usually entails some kind of geopolitical risk and Peru is no exception. Many of the prospective areas where contracts have been awarded are in areas of the country where the indigenous populations have expressed much opposition to drilling. This opposition has recently become violent as the exploration moves out of the planning stage.

There is more to oil and gas exploration in South America than in Brazil and Venezuela. Several others are moving toward developing these valuable assets. (To learn more, check out our Oil And Gas Industry Primer.)

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By Eric Fox

Eric J. Fox, is the founder of Brittain Capital Management, LLC., which manages the Alesia Fund, LP., a Value oriented long/short investment partnership. You can read more of his views on investments at his blog - Stock Market Prognosticator.

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