REUTERS: Occidental signs controversial $50 million Peru oil deal
LIMA, Peru — North American oil companies Occidental Petroleum Corp., Amerada Hess Corp., and Talisman Energy Inc. agreed Monday to invest $50 million to drill for oil in Peru's northern jungle region, despite fierce resistance from indigenous groups and environmentalists.
The exploration deal in Block 64 on the Peru-Ecuador border marks the return of major oil companies to Peru, which is trying to win foreign investment to develop its energy fields buried deep beneath the rain forest.
But conservationists and local Achuar tribes say oil exploration and exploitation will damage one of the world's most biodiverse tropical habitats and destroy indigenous cultures that have minimal contact with the outside world.
U.S.-based Occidental and Amerada and Canada's Talisman won a contract to exploit 2,357,385 acres (954,000 hectares) and have already began drilling.
"We started drilling on August 2 to a depth of 5,000 feet (1,524 meters) and we hope to find oil or gas by the end of the year," Occidental's representative in Peru, Jorge Perez, told reporters. "We plan to open a second well soon and we aim for results there by mid-2005," he added.
The three companies expect to invest $20 million in each well and another $10 million in seismic studies.
Occidental, which has a 50 percent share in the Block 64 exploration, is also negotiating a contract with Amerada and Talisman to explore in the adjacent Block 101, Perez said.
But the 6,000-strong Achuar tribe has threatened an armed struggle using traditional weapons against oil exploration. U.S. energy group Burlington Resources Inc. pulled out of Block 64 in December because of indigenous resistance.
The Achuars, who lobbied Congress to annul the concession, say past work by Occidental in the 1980s poisoned ground water supplies and has killed dozens of elderly Achuars.
Occidental, which says it spent $7 million cleaning up after it left, said Monday it was planning an exhaustive environmental impact study.
"We want the best possible relationship with the native communities and we are working toward that," Perez said.
Peru is eyeing energy exports as a key driver for its $60 billion economy and last week celebrated the arrival of its huge Camisea gas reserves in Lima, two decades after they were discovered in the southern jungle.
Once an oil exporter in the 1970s, Peru's energy potential has been largely untapped because few companies have found hydrocarbons and Peru has done little to promote exploration. But foreign companies have been showing more interest since a royalty on exploration was recently cut to 5 percent.
Meanwhile, the government hopes Camisea will turn Peru into a net energy exporter and natural gas exports to Mexico are expected to start in 2008 or 2009.