North Peruvian Oil Pipeline: The longest pipeline in the country, the North Peruvian Oil Pipeline regularly leaks, which has caused considerable social and environmental damage, contaminating rivers and streams that Indigenous communities depend on. A 2020 report by Oxfam and Coordinadora Nacional de Derechos Humanos (CNDDHH) spills due to operational failures,  corrosion, third parties, and natural causes. For example, in 2014, an incident in Cuninico, Loreto, resulted in the spillage of 2,500 barrels of oil. In 2016,  Morona, also in Loreto, experienced a spill of 1,444 barrels, while Imaza in Amazonas witnessed a release of 3,000 barrels the same year. These three cases alone led to almost 7,000 barrels of oil contaminating the rivers, streams, and soils of the Amazon, and leading to opposition from affected communities as well as protests and legal action.

Block 64: Petroperú is seeking to start operations in Block 64,  located in the district of Morona, in the province of Datem del Marañón. Affected Indigenous communities, the Achuar People of the Pastaza River and the Autonomous Territorial Government of the Wampis Nation, fear the operations will cause similar environmental impacts as those associated with the North Peruvian Pipeline.

In September 2023, the Indigenous nations of the northern Peruvian Amazon published a Unified Declaration to oppose Petroperú’s expansion into Block 64 and new Blocks overlapping with their ancestral lands. "We warn any company or financial entity seeking to partner with Petroperú that they do not have our consent, and we will not allow their operations. Likewise, we reaffirm our rejection of the offer of new oil exploitation areas being made by the Government that will overlap with our territories," they declared.

During a 2023 presentation, Petroperú’s president announced project  timeline for starting operations in Block 64 by the latter half of 2026. The company is currently carrying out the Environmental Impact Assessment (EIA) for the development.

Block 192: Communities impacted by operations in Block 192 have accepted oil operations after years of complex negotiations over liability remediation, health care, basic services, and damage compensation. Their expectation is that the Peruvian State will remedy the environmental liabilities left by the previous operators. However, remediation is far from being completed since no operator seems to want to be in charge of cleaning up costly environmental liabilities. 

After being inactive for two years, in February 2023, Petroperú and Perupetro signed a contract to restart operations in Block 192, promising  "sustainable development," "respect for the Indigenous population," and "harmonious operations with the environment." However, the environmental remediation of the communities’ territories has still not begun, and oil spills have not ceased due to lack of maintenance. Given the poor condition of the infrastructure and pipeline system in Block 192, there is a significant risk of collapse, which would exacerbate ecological harm to the Amazon and pose a direct threat to the Indigenous communities residing in the vicinity of the block in Loreto. 

Additional Blocks: Currently, the Peruvian government is advocating for other blocks located on the Peruvian coast and the Amazon to be operated by Petroperú, once their respective concession contracts with other private operators end, between 2023 and 2028. All of these future blocks are in a similar situation as Block 192, meaning they have unresolved environmental liabilities without a willingness on the side of current operators to assume these liabilities. Under this situation, Petroperú will be potentially assuming responsibility for the environmental impacts on those blocks.

For sources and further information, please see Amazon Watch, "The Risks of Investing in Petroperu", Fall 2022.

The oil and gas industry is a major source of pollution in the western Amazon. Under these circumstances, the blocks that Petroperú intends to operate – 192 and 8 located in Datem del Marañón, Loreto – have an unresolved history of contamination. Since 1997 there have been 422 spills in this region. In the same period on the North Peruvian coast, close to the Talara Refinery, there have been 404 spills. 

Similar circumstances are present in Blocks 192 and 8, and will probably also occur in the other blocks that Petroperú intends to operate in the future on the North Peruvian coast. In addition, the operations of Petroperú in the Peruvian Amazon have caused long-term environmental liabilities, affecting the surrounding communities that depend on nature to survive. Mainly, the operation of the old and deteriorated North Peruvian Pipeline caused more than 94 oil spills between 2001 and 2019. Despite this situation, Petroperú continues with operations that have cost the company approximately $4.3 million dollars just in remediation of environmental liabilities.

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An oil spill flows down Chuuntsa Creek in Oil Block 1-AB, in the Peruvian Amazon..

Photo: Amazon Watch.

The oil and gas industry in particular is a major driver of deforestation in the western Amazon, where oil companies often are the first to cut down trees in order to carve roads into the rainforest. Industrial activities such as oil and gas drilling in Peru, driven by Petroperú, undermine biodiversity that’s essential for maintaining healthy ecosystems, providing fresh water, pollination cycles, soil fertility, and food production, as well as protecting against the spread of zoonotic illness and species extinction. The loss of biodiversity, coupled with constant pollution and deforestation, directly affect Peruvian communities and Indigenous groups living in voluntary isolation. Biodiversity is also inextricably linked to climate, such that good functioning of both is required for our quality of life.

The Pastaza River complex is the largest wetland in the Peruvian Amazon, home to nearly 300 species of fish and birds, and a source of livelihood for the Indigenous communities living there. Its international importance has been recognized by Ramsar, the UN Convention on wetlands conservation. The North Peruvian Pipeline cuts through this sensitive area, posing a direct risk to its ecological integrity. Forest destruction caused by industrial activities is forcing the Amazon to a tipping point. If the Amazon continues to be exploited for oil and gas extraction, the tropical forest will begin a spontaneous transition to a savannah ecosystem. According to the report Capitalizing on Collapse, in order to avert crossing the point where the rainforest spontaneously starts to convert to savannah, 75 to 80% of Amazonia must remain intact. As of 2023, 74% of the Amazon remains intact (key priority areas and low degradation), with 6% in a restorable state of degradation.

After the departure of Geopark from Block 64 in 2020, the block has been under the administration of Perupetro (the Peruvian oil licensing agency), and the license of operations under Petroperú (the state-run oil company). In February of 2022 – with the ongoing COVID-19 pandemic – Perupetro organized a “community gathering” to introduce the new operator Petroperú to the communities potentially affected by its operations in Block 64. Since Perupetro went against government advice to not to carry out face-to-face consultations to limit the risk of contagion, the Achuar and the Wampís Indigenous peoples denounced Perupetro for putting their lives at risk.

Allegations of corruption

Petroperú’s high-level executives are politically appointed. This situation represents a risk for investors because Petroperú’s corporate governance and administration depend on the government in power. Allegations have often been made involving the misuse of resources and corporate relationships involving officials accused of or investigated for corruption. 

In fact, Petroperú has a history of corruption scandals and crises due to the mismanagement by these high-level executives. The government of current Peruvian president Pedro Castillo has been no exception. Over the past months, Petroperú has entered into a crisis precipitated by a corruption scandal involving President Castillo, the President of the Board of Directors, and the Chief Executive Officer, which catalyzed the departure of key high-level executive managers and the financial collapse of the company.

Financial risks

Petroperú’s mismanagement due to the poor selection of high-level executives has plunged the company into one of its worst financial moments. Petroperú is submerged in a financial hole caused by its over-indebtedness due to the modernization of the Talara Refinery coupled with very little crude oil production. Under the political appointees of President Castillo, Petroperú has shown very little financial transparency, leading to the downgrading of its credit rating by S&P and Fitch. Poor governance and little transparency represent a financial risk for investors.

In 2023, Petroperú failed to obtain a 500 million dollar loan guarantee from Italy’s export credit agency (SACE), partly due to intense scrutiny from Indigenous nations and strong backlash against Petroperú in Italy. In early 2024, despite the company’s track record of environmental, human rights and climate risks, the Peruvian Government decided to provide lines of credit and guarantees to Petroperú to keep the company afloat. Desperate to raise money to supply its refinery, import crude, and expand its oil production, Petroperú will turn to international financial markets in 2024.