Peruvian Oil and Gas and Infrastructure Opportunities

Transcription

1 Peruvian Oil and Gas and Infrastructure Opportunities Houston, Texas October 26, Haynes and Boone, LLP -1-

2 Outline of Presentation 1. General Overview of Peru Political Situation Main Economic Indicators Favorable Investment Climate FTAs and Other Treaties Tax 2. Overview of Oil and Gas Market in Peru 3. Camisea Project 4. Other Oil and Gas Projects 5. Other Infrastructure Projects 2010 Haynes and Boone, LLP -2-

3 Oil & Gas 1. General Overview of Peru 2010 Haynes and Boone, LLP -3-

4 Mario Vargas Llosa Nobel Prize Winner for Literature in Haynes and Boone, LLP -4-

5 Political Situation Alan Garcia, current President and head of APRA Party Alan Garcia 2010 Haynes and Boone, LLP -5-

6 Political Situation (cont.) Leading Presidential Candidates for April 2012 Keiko Fujimori Luis Castañeda Lossio (former Lima Mayor) Alejandro Toledo (former President) 2010 Haynes and Boone, LLP -6-

7 Oil & Gas Main Economic Indicators Third largest country in South America with 1.29 million km 2 Three natural regions: Coast, Andes, and Rainforest Population: 29 million Lima has approximately 30% population (approximately 9 million) Arequipa (860,000) Trujillo (812,000) GDP: US$ 130 billion (2009) GDP per capita: US$ 4,300 (2009) GDP Growth: 0.9% (2009) Inflation: 0.25% (2009) Currency: Nuevo Sol (S/.) 2010 Haynes and Boone, LLP -7-

8 Peru Continuing with Region Leading Growth Gross Domestic Product (Annual % variation) Source: Central Reserve Bank of Peru Haynes and Boone, LLP -8- * Forecasted by the IMF. Source: IMF

9 Exports (US$ Million) Private Investment (US$ Million) Source : Central Reserve Bank of Peru 2010 Haynes and Boone, LLP -9- Source : Central Reserve Bank of Peru

10 Trade Balance (US$ Million) Imports of Capital Goods (US$ Million) Source: Central Reserve Bank of Peru and Ministry of Economy and Finance 2010 Haynes and Boone, LLP -10-

11 Central Government Tax Revenues (US$ Million) Public Debt (% GDP) PUBLIC DEBT EXTERNAL PUBLIC DEBT DOMESTIC PUBLIC DEBT Fuente: Central Reserve Bank of Peru 2010 Haynes and Boone, LLP -11-

12 Exchange Rate in Latin America (Index 2000=100) Inflation in Latin America (Accrued) 2009 Average Exchange Rate: S/.3.01/ $ Source: INEI 2010 Haynes and Boone, LLP -12- Inflation Rate 2009: 0.25% Source: Central Reserve Bank of Peru, Chile, Mexico and Argentina

13 Net International Reserves (US$ Million) Investment Grade Latin American Benchmarking Country S&P Fitch Moody s Chile A+ A A1 Mexico BBB BBB Baa1 Peru BBB- BBB- Baa3 Brazil BBB- BBB- Baa3 Colombia BB+ BB+ Ba1 Venezuela BB- BB+ B2 Argentina B- RD B3 Bolivia B- B B2 Ecuador CCC+ CCC Caa3 Source : Central Reserve Bank of Peru 2010 Haynes and Boone, LLP -13- Source : Standard & Poor`s, Fitch Ratings y Moody s

14 LEGAL STABILITY AGREEMENTS INVESTORS Stability of right to non discriminatory treatment. Stability of income tax rules applicable to dividends. Stability to freely use most favorable exchange rate available in market. TARGET COMPANY Stability of labor regime. Stability of regimes for promotion of exports. Stability of Income Tax Regime. Stability of free availability and remittance of foreign currency, dividends, and royalties. Requirement: US$ 10 MM for hydrocarbon and mining sectors. Minimum investment of US$ 5 MM in any other economic sector. Term: 10 years (general). For concessions, term according to the contract s life (Max. 60 years) Haynes and Boone, LLP -14-

15 Oil & Gas Favorable Investment Climate Dynamic economy with highest growth rates in region and several years of economic stability Attractive framework for foreign direct investment based on market freedom and equality Non-discriminatory treatment of foreign investors and access to all economic sectors Promotion of free competition and private property Investment grade rating for country Investment has increased 20% annually ( ) 2010 Haynes and Boone, LLP -15-

16 In Force United States of America Canada Chile China Singapore Under Negotiation Korea Thailand Mexico Japan European Union Free Trade Agreements 2010 Haynes and Boone, LLP -16-

17 Bilateral Investment Agreements Peru has signed Bilateral Investment Treaties (BIT) and Free Trade Agreements that underpin its liberalization policy. Australia China* Korea Malaysia Singapore* Thailand Japan * FTA Canada* United States* Cuba El Salvador Argentina Bolivia Chile* Colombia Ecuador Paraguay Venezuela Germany Belgium and Luxemburg Denmark Spain Finland France Netherlands Italy Norway Portugal United Kingdom Czech Republic Romania Sweden Switzerland It has also signed double taxation agreements with Brazil, Chile and Canada Haynes and Boone, LLP -17-

18 Russia Canada EFTA Rusia China Thailand Singapore Korea Japan A P E C México: ACE 8 USA Central America Andean Community O M C CARICOM European Union Morocco China India MERCOSUR ECA 58 Australia New Zealand Chile: ACE 38 ECA Plus South Africa Countries with agreements in force Countries with agreements signed Countries under negotiations Upcoming negotiations Countries with completed negotiation 2010 Haynes and Boone, LLP -18-

19 Peruvian Tax Regime Tax Corporate Profits Applicable Rate 30% Agriculture, agribusiness and aquaculture 15% INCOME Dividends 4.10% Royalties 30% Interest on loans from abroad 4.99% Value Added Tax (VAT) 19% Financial Transactions Tax 0.05% Net asset tax, applicable on excess above S/.1,000,000* (akin to minimum income tax) 0.40% 2010 Haynes and Boone, LLP -19-

20 Special Regime of Anticipated VAT Recovery BENEFITS Return of of Value Added Tax Tax during pre-production stage of of project (minimum 2-year term). Applicable to to all all sectors of of economic activity. For For agricultural activity, not not necessary to to meet minimum investment. For For other activities minimum investment is is US$ 5 million. Project can can be be divided into into stages, phases, or or similar levels Haynes and Boone, LLP -20-

21 Simplified and Reduced Tariff Structure TARIFF LEVELS AD VALOREM + SURCHARGES TARIFF CODES NUMBER PROPORTION (%) 0% 3, % 2, % Total 7, ,0 EFFECTIVE AVERAGE TARIFF 1.9 % Source: Peruvian Customs 2010 Haynes and Boone, LLP -21-

22 Recognition of Favorable Investment Climate Peru is first in region for government readiness for private investment in infrastructure World Economic Forum Peru tops global macro prudential indicator ranking Getulio Vargas Foundation Peru ranks first in ranking of business climate in Latin America Position Country Points 1 Peru Colombia Chile Uruguay El Salvador Bolivia Brazil 4.2 Dominic. Rep Mexico Guatemala Venezuela Argentina 3.1 Position Country Points 1 Peru China Switzerland France Netherlands Mexico Argentina Brazil Chile Colombia Venezuela 3.18 Position Country ICE* 1 Peru Brazil Chile Paraguay México Uruguay Colombia Ecuador Bolivia Argentina Venezuela 1.6 Source: World Economic Forum, Benchmarking National Attractiveness for Private Investment in LA Infrastructure Source: World Economic Forum, The Financial Development Report Haynes and Boone, LLP -22- *Economc climate index Source: Foundation of Getulio Vargas de Brasil 2009.

23 2. Overview of Oil and Gas Market 2010 Haynes and Boone, LLP -23-

24 Oil Market in Peru Peruvian Crude Oil Production and Net Imports ( ) Fuel Demand by Product Oil product Demand, 000b/d Structure, % GLP % Gasolines % Kerosene 0.9 1% Turbo A % Diesel % Residuals % Other 5.3 3% Total % Crude Oil Production (MB/D) Crude Oil Net Imports (MB/D) Source: Ministry of Energy and Mines of Peru Haynes and Boone, LLP -24-

25 Oil Market in Peru (cont.) Peru is net importer of Crude Oil and Fuels Peruvian crude oil production has declined since 1999, while crude oil net imports have increased, reaching average of more than 80,000 barrels/day over last 4 years ( ) As for fuel consumption, in 2008, it reached total of 165,000 barrels/day and production totaled 145,000 barrels/day, producing deficit of 20,000 barrels/day Oil imported primarily from Ecuador 2010 Haynes and Boone, LLP -25-

26 Natural Gas Market Natural Gas Production in Peru ( ) Proven and Certified Natural Gas reserves in Peru (February 2009) Zone Proven (trillion cubic feet) % of total Camisea (southern jungle) Block % Block % Northern east % Central jungle % Total % Source: Ministry of Energy and Mines of Peru National production of Natural Gas, MB/D Camisea's production of Natural Gas, MB/D 2010 Haynes and Boone, LLP -26-

27 Natural Gas Market (cont.) In 2004, a major structural change occurred in gas market in Peru due to start of operations of Camisea gas field (Block 88) Camisea represents 93% of Peru s natural gas reserves and 77% of Peru s natural gas production 2010 Haynes and Boone, LLP -27-

28 Natural Gas Pipelines (cont.) Natural Gas from Camisea is divided into natural gas and natural gas liquids in Malvinas separation plant (in Camisea region) Liquids are transported to Pisco through the Camisea-Pisco liquid pipeline and processed by fractionation plant Natural gas is transported by separate pipeline to Pisco and then to Lima for local distribution Peru LNG project is natural gas export project starting in 2010, with total estimated CAPEX of US$ 3 billion and total allocated reserves of 4.1 trillion cubic feet of Dry Natural Gas Successful US$ 200 million local bond offering to institutional investors by Peru LNG in 2009 Q Haynes and Boone, LLP -28-

29 Industry s Main Players Key Oil Upstream Players, 2008 No. Company Economic Group Oil Production Market Share (MB/D) (%) 1Pluspetrol Norte Pluspetrol, CNPC (China) % 2Petrobras Energía Petrobras % 3 Petro Tech Ecopetrol, KNOC Corporation % 4Interoil Peru Interoil Corporation 3.7 5% 5 Others % Total % 2010 Haynes and Boone, LLP -29-

30 Industry s Main Players (cont.) Key Gas Upstream Players, 2008 No. Company Economic Group Gas Production Market (MB/D) Share (%) 1Camisea Consortium Pluspetrol Perú, Hunt Oil, SK Energy % Techpetrol, Sonatrach, Repsol 2 Aguaytia Maple Gas % 3Petrobras Energía Petrobras 1.9 3% 4 Petro Tech Ecopetrol, KNOC Corporation 2.4 4% 5Others 1.3 2% % 2010 Haynes and Boone, LLP -30-

31 Industry s Main Players (cont.) No. Company Economic Group Key Downstream Players, 2008 Refining capacity (MB/D) Production 2008 (MMBLS) Market Share (%) Storage capacity (MMBLS) Gas Stations 1 Petroperú Peruvian State % Repsol YPF Repsol % Total % Haynes and Boone, LLP -31-

32 License Agreements 2010: 86 License Agreements in force in Peru Investment focused in light and heavy oil in north in jungle and in natural gas and condensates in Camisea (further south in Cuzco Region) 18 License Agreements in production 68 License Agreements in exploration 14 additional License Agreements awarded in recent Bidding Round 2010 Haynes and Boone, LLP -32-

33 License Agreements License Agreements may only by amended by prior agreement of parties Tax stability (entire tax regime) Temporary importation (2 years) Advance VAT recovery Accounting in foreign currency No restriction on foreign currency or for transfer of funds abroad Oil company owns 100% of produced hydrocarbons (ability to book reserves) License term (i) 30 years for oil and (ii) 40 years for natural gas Exploration term: 7 years (3 years extension) 100% risk taken by oil companies Oil companies pay Peruvian Government royalty based on hydrocarbons production (ranges 5% to 45%) 2010 Haynes and Boone, LLP -33-

34 Oil Companies Doing Business in Peru Representative List Pluspetrol (Argentina) Hunt Oil (US) SK Energy (Korea) Repsol (Spain) Tecpetrol (Argentina) Sonatrach (Algeria) Petrobras (Brazil) Ecopetrol (Colombia) Talisman (Canada) Perenco (France) CNPC (China) KNOC (Korea) 2010 Haynes and Boone, LLP -34-

35 3. Camisea Project 2010 Haynes and Boone, LLP -35-

36 Camisea Upstream Camisea Consortium produces Natural Gas and Condensates from Block 88 and Block 56 Wellhead price of natural gas for local market is subject to price caps (not applicable to other natural gas producing blocks) Condensates are marketed at market prices Members of the Camisea Consortium Pluspetrol (Argentina) Operator Hunt (US) SK Energy (Korea) Tecpetrol (Argentina) Sonatrach (Algeria) Repsol (Spain) 2010 Haynes and Boone, LLP -36-

37 2010 Haynes and Boone, LLP -37-

38 Camisea Transportation 2 transportation concession agreements (for liquids and natural gas) were awarded as part of Camisea Project to Transportadora de Gas del Peru (TGP) Transportation fee: regulated TGP shareholders Tecgas (Argentina) Operator Pluspetrol (Argentina) Hunt (USA) SK Energy (Korea) Sonatrach (Argelia) GDF Suez (France) Graña y Montero (Peru) 2010 Haynes and Boone, LLP -38-

39 2010 Haynes and Boone, LLP -39-

40 Camisea Downstream Lima natural gas distribution system (Calidda) Ashmore (US) Promigas (Colombia) Ica natural gas distribution system (Congas) EEB (Colombia) TGI (Colombia) Distribution fee: regulated 2010 Haynes and Boone, LLP -40-

41 2010 Haynes and Boone, LLP -41-

42 Camisea Project 2010 Haynes and Boone, LLP -42-

43 SM 3 Gas Processing The System MALVINAS Injection System Wells (3 Inj) Dry Gas HUMAY LURIN Reser. CLUSTER INJECT. SM 1 Gather System Wells (5 Prod) SEPARAT. S.CATCHER DESHIDR. U TIL ITIES WET GAS CRYO C3 C4 C5+ Dry Gas COMPRES. Gas Compres. NGL Dry Gas Transport Fract Topping Gas Pipeline (TGP) Feed Gas Pipeline (Up-stream) Storage Fractionation C3 (70%) C4 (30%) D2 LPG CLUSTER PRODUCT. Condensate Transport Liquid Pipeline (TGP) PISCO Marine Terminal C3 C4 VN D2 LPG 2010 Haynes and Boone, LLP -43-

44 LNG Project Peru LNG Shareholders Hunt (US) - Operator SK (Korea) Repsol (Spain) Marubeni (Japan) First LNG plant in South America (operating since June 2010) Largest investment project in Peru: US$3.8 billion 2010 Haynes and Boone, LLP -44-

45 2010 Haynes and Boone, LLP -45-

46 Prices Evolution of Natural Gas Prices by Industry Price Evolution of Fuels US$/MMBTU US$/MMBTU Jan 04 May 04 Sep 04 Jan 05 May 05 Sep 05 Jan 06 May 06 Sep 06 Jan 07 May 07 Sep 07 Jan 08 May 08 Sep 08 Jan 09 May Generation Large Industry Medium industry Natural Gas for Vehicles Kerosene Diesel 2 Residuals Liquified Petroleum Gas Gasolines 2010 Haynes and Boone, LLP -46-

47 Prices (cont.) In general, local prices for liquid fuels have followed international price trends However, Camisea s Natural Gas prices behave independently of international benchmarks (such as Henry Hub) due to existence of price subsidies in favor of gas-powered generators and industrial users 2010 Haynes and Boone, LLP -47-

48 Investment In Upstream Projects 1600 Total Invesment in Exploration and Exploitation (in MMUS$) 90 Number of Exploration and Exploitation Contracts granted by the State Source: Perupetro Source: Perupetro Total investment in exploitation Total investment in exploration Number of contracts for exploration Number of contracts for exploitation Rapid increase in number of exploration and production contracts over last decade is associated with arrival of several international private companies in oil and gas industry 2010 Haynes and Boone, LLP -48-

49 4. Peruvian Oil and Gas 2010 Haynes and Boone, LLP -49-

50 New Pipeline Projects Hydrocarbons: New Pipeline Projects 1. Gas Pipeline to Chimbote 2. LPG Pipeline Pisco Lurín Callao 2010 Haynes and Boone, LLP -50-

51 GAS PIPELINE TO CHIMBOTE 2010 Haynes and Boone, LLP -51-

52 LPG PIPELINE PISCO LURIN CALLAO 2010 Haynes and Boone, LLP -52-

53 LPG PIPELINE PISCO LURIN CALLAO 2010 Haynes and Boone, LLP -53-

54 Other Projects In Progress Hydrocarbons: Exploration Projects (confirmed reserves) 1. Block 39 (Perenco) 2. Block 67 (Perenco) 3. Block 57 (Repsol/Petrobras) 4. Block 58 (Petrobras) Hydrocarbons: Refinery projects 1. La Pampilla Refinery Modernization (Repsol) 2. Talara Refinery (Petro Peru) Modernization Hydrocarbons: Expansion Projects 1. Las Malvinas Separation Plant Expansion (Camisea) 2. TGP s Dry Natural Gas Pipeline Expansion 3. Calidda s Natural Gas Distribution System Expansion (expansion of Lima network) (Ashmore) 2010 Haynes and Boone, LLP -54-

55 Other Projects in Progress (cont d.) Hydrocarbons: Ethanol Projects 1. Maple Ethanol Project (sugar) 2. Stratos del Perú Ethanol Project (sugar) Hydrocarbons: Petrochemical Projects 1. Peru Nitrogen Complex Project (CF Industries) 2. Nitratos del Peru (Grupo Brese/Sigdo Cappers) 3. Orica Nitratos Peru Hydrocarbons: New Pipeline Projects 1. South Andean Gas Pipeline 2. Natural Gas Distribution for Ica 2010 Haynes and Boone, LLP -55-

56 Natural Gas Pipelines Existingand planned pipelines CAMISEA PAMPA MELCHORITA PLANT Oil operation blocks Existing pipelines Camisea pipeline Aguaytia pipeline Liquid pipeline Camisea Pisco Pipelines under construction Pipeline of Peru LNG Future projects Southern Andean pipeline of Kuntur Branches of the Kuntur pipeline Distribution zones of Kuntur Pipeline to be constructed by TGI PISCO FRACTIONATING PLANT Future projects Pipeline to chimbote LPG pipeline Pisco Lima 2010 Haynes and Boone, LLP -56-

57 South Andean Gas Pipeline 2010 Haynes and Boone, LLP -57-

58 2010 Haynes and Boone, LLP -58- BLOCK 39

59 BLOCK 67 BLOCK 39: PROJECT SUMMARY Last update: September Haynes and Boone, LLP -59-

60 BLOCK Haynes and Boone, LLP -60-

61 BLOCK Haynes and Boone, LLP -61-

62 BLOCK Haynes and Boone, LLP -62-

63 LAS MALVINAS PLANT EXPANSION Last update: September Haynes and Boone, LLP -63-

64 TGP S DRY NATURAL GAS PIPELINE EXPANSION 2010 Haynes and Boone, LLP -64-

65 CALIDDA S GAS DISTRIBUTION EXPANSION 2010 Haynes and Boone, LLP -65-

66 SOUTH ANDEAN GAS PIPELINE 2010 Haynes and Boone, LLP -66-

67 SOUTH ANDEAN GAS PIPELINE 2010 Haynes and Boone, LLP -67-

68 NATURAL GAS DISTRIBUTION FOR ICA 2010 Haynes and Boone, LLP -68-

69 BLOCK 39: PROJECT SUMMARY MAPLE ETHANOL PROJECT Last update: September Haynes and Boone, LLP -69-

70 MAPLE ETHANOL PROJECT Last update: September Haynes and Boone, LLP -70-

71 STRATOS ETHANOL PROJECT 2010 Haynes and Boone, LLP -71-

72 ORICA NITRATOS PERU PROJECT 2010 Haynes and Boone, LLP -72-

73 PERU NITROGEN COMPLEX 2010 Haynes and Boone, LLP -73-

74 NITRATOS DEL PERU 2010 Haynes and Boone, LLP -74-

75 NITRATOS DEL PERU 2010 Haynes and Boone, LLP -75-

76 5. Other Infrastructure Projects 2010 Haynes and Boone, LLP -76-

77 Portfolio Projects 69 Projects Sector Estimated Investment (US$ Million) Energy 3,834.2 Ports Land Transport Airports Agriculture Sanitation Real Estate Tourism Penitentiary Facilities 29.0 Telecommunications TOTAL 7,949.9 Priority Projects 2010* 24 Projects Sector Estimated Investment (US$ Million) Energy Ports Land Transport Airports Agriculture Sanitation Real Estate 37.0 Tourism Penitentiary Facilities 29.0 TOTAL 4,379 *According to U.D N , U.D N and U.D N Haynes and Boone, LLP -77-

78 Sector / Project Estimated Investment (US$ Million) Expected date of Award Energy Transmission Line Chilca Marcona - Montalvo (500 Kv) Awarded on April 30, 2010 Transmission Line Tintaya - Socabaya in 220 Kv and associated Awarded on July 8, sub stations Strengthening of the North system with second transmission Awarded on July 8, 14.5 circuit 220 Kv, between Talara and Piura Cold Power Generation Reserve (3 dual thermal plants of simple cycle, 800 MW) November 4, 2010 Transmission Line Trujillo Chiclayo KV and associated sub stations February 2011 Ports Yurimaguas Port Terminal 38.9 Dec Pucallpa Port Terminal 16.7 July 2011 San Juan de Marcona Port Terminal June 2011 North Multipurpose Terminal of Callao Dec Navigable River Routes, first stage: Yurimaguas-Iquitos To be defined Sept Sanitation La Chira Waste Water Treatment Plant Nov. 9, 2010 Penitentiary Facilities Concession of Penitentiary Facilities 29.0 Dec Haynes and Boone, LLP -78-

79 Sector / Project Estimated Investment (US$ Million) Expected date of Award Land Transport Road IIRSA Centro: section Awarded on July 27, 2010 Road Autopista del Sol : Sullana section Border with Ecuador To be defined July 2011 Road Panamericana Sur: Ica Border with Chile III Q 2011 Lima and Callao Mass Transportation Electric System Line 1: Villa El Salvador Av. Grau.-San Juan de Lurigancho To be defined Dec Huancayo Huancavelica Train 11.6 Dec.2010 Cajamarca Bayovar Train To be defined Under evaluation Airports International airport of Chinchero - Cusco IV Q 2011 Second Group of Regional Airports Awarded on September 7, 2010 Tourism San Lorenzo Island III Q 2011 Real Estate San Martin former headquarters 37.0 Agriculture (Irrigation Projects) Awarded on July 22, 2010 Majes - Siguas II Awarded on September 13, 2010 Chavimochic project phase 1 third stage June Haynes and Boone, LLP -79-

80 CONCLUSION / Q&A 2010 Haynes and Boone, LLP -80-

81 Ismael Noya Estudio Echecopar Av. De la Floresta 497 Piso 5 San Borja Lima 41 - Perú Phone: 51 (1) Fax: 51 (1) Eduardo Guevara Estudio Echecopar Av. De la Floresta 497 Piso 5 San Borja Lima 41 - Perú Phone: 51 (1) Fax: 51 (1) Thank You Larry B. Pascal Haynes and Boone, LLP 2323 Victory Avenue, Suite 700 Dallas, Texas Phone: Fax: D Haynes and Boone, LLP -81-