Peru’s government is considering separating the assets of its troubled state oil company, including a new multibillion-dollar refinery that is making losses.
President José Giri announced the plan in a decree published less than two hours before midnight on New Year’s Eve on the government’s official website. The move was met with sharp criticism, as opponents described it as a risky privatization, while some sought to dismiss the Minister of Finance.
Petroleos del Peru SA has become a continuing burden on public finances, having needed rescue packages estimated at 17 billion soles ($5 billion) over the past few years.
Privatization of oil assets in Peru
The decree is perhaps the most ambitious attempt yet to restructure the company, which is struggling to meet its debt obligations without government support. The decree is limited to restructuring assets without addressing the company’s debts, which amount to about $5.45 billion, according to S&P estimates.
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The decree stated that Petroperu suffers from a “structural deficit in generating liquidity from its operations,” noting that the company’s available cash did not exceed 66 million soles (less than 20 million US dollars) as of October. Gehry only took power in October, and he faced difficulties in creating stable leadership for the company, appointing three chairmen to the board within three months.
Opposition MP Heidi Juarez Calle has prepared a draft motion of no confidence in Finance Minister Denis Miralles over the proposal, which could lead to her dismissal, according to a report by the newspaper La Republica.
The draft argues that the decree is illegal because it was not presented first to Peru’s Congress, and that it improperly allocates funding, including allocating some 384 million soles to cover compensation for layoffs and future management of transferred assets. Miralles is also held responsible for statements that negatively affected the value of the country’s sovereign bonds, according to the newspaper.
If the motion of no confidence is supported by a majority of members of Congress, this will force Miralles to resign.
Why is Talara Oil Refinery sold?
Most of Petroperu’s problems relate to the construction of the $6 billion Talara refinery, which opened in 2023 at an over-budget cost and after years of delays. The company had issued bonds in international markets to finance construction work.
Under the decree, private investment agency ProInversion will be able to spin off the Talara refinery and other undisclosed assets and turn them into independent business units, without specifying what will subsequently become of these new units.
The decree also allows the transfer of an additional 240 million soles to Petroperu.