Peru Repeals Tullow Oil Laws Signed as Kuczynski Quit Presidency

(Bloomberg) -- Peru’s President Martin Vizcarra repealed decrees permitting London-based Tullow Oil Plc to begin exploration at five offshore oil blocks, in a move criticized by the industry as creating uncertainty for investors.

Explaining the government’s decision to revoke the contracts signed by Pedro Pablo Kuczynski the day he resigned, the Energy & Mines Ministry said the public hadn’t been adequately consulted on the proposed investments. The government’s oil contracts agency approved the licenses for Tullow on Dec. 20.

Kuczynski signed the laws March 21 as he quit amid allegations he sought to buy votes to avoid impeachment. Fisherman worried that oil exploration will damage fishing grounds blocked roads in the north of Peru in a protest last month, while opposition parties urged Vizcarra to annul the legislation.

Tullow Oil said in an emailed statement that the decision was “deeply disappointed,” adding it will consider its next steps. An audit by the country’s Comptroller’s office found the firm complied with rules for obtaining the licenses, it said.

Consultation Process

In Wednesday’s statement, the ministry said the government seeks to build “political and social consensus to help create a climate of stability and social peace” while developing its natural resources in a sustainable way. It called on investors, politicians, and local fishermen to support a consultation process that the oil agency Perupetro will undertake.

Peru’s mining and hydrocarbons industry group, known as SNMPE, said the move creates uncertainty for business at a time when the government should by encouraging new investments in the industry. The government this month appointed its first vice-minister for hydrocarbons in line with a measure Kuczynski initiated to revert a slump in oil production.

Peru imports $5 billion of oil a year to cover a shortfall in production, SNMPE said in an emailed statement. Investment in exploration is less than 2 percent the level reached in 2012.

Tullow Oil’s shares extended losses on the news, falling 5.2 percent to 258.9 pounds at the close of trading in London. The company has interests in 90 exploration and production licenses in 16 countries, according to its website.

©2018 Bloomberg L.P.