Oil and Gas

Last verified on Thursday 10th May 2018

Peru

Carlos Canales, David Auty and Roberto Redhead
Canales Auty
  1. 1.

    What is the legislation applicable to oil and gas activities in your country? Is it federal or state legislation, or both?

  2. Oil and gas legislation in Peru is currently going through a period of review and this includes the central piece of legislation, the Organic Hydrocarbons Law – Supreme Decree 042-2005. This federal legislation sets out a framework for the whole hydrocarbons chain from exploration through to the distribution of hydrocarbon products. In December 2017, the Ministry of Energy and Mines presented a proposal for the new piece of legislation and invited feedback from stakeholders. One of the central aims of the proposed legislation is to encourage investment in the sector. Central pieces of legislation covering the oil and gas sector include the following:

    General Regulations 

    • Constitutional provisions relating to Natural Resources and Environment;
    • Sole Consolidated Text of the Law No. 26221, Organic Law of Hydrocarbons, approved by Supreme Decree No. 042-2005-EM;
    • Regulation of article 11º of the Sole Consolidated Text of the Organic Law of Hydrocarbons, approved by Supreme Decree No. 045-2008-EM;
    • Regulation of Qualification of Oil Companies, approved by Supreme Decree No. 030-2004-EM;
    • Procedures and Indicators for Qualification of Oil Companies, approved by Board Agreement No. 048-2010;
    • Regulation of Exploration and Exploitation of Hydrocarbons Activities, approved by Supreme Decree No. 032-2004-EM;
    • Regulations for the Implementation of the Royalty and Compensation in Oil Contracts, approved by Supreme Decree No. 049-93-EM;
    • Law No. 28109, Law for the Promotion of Investment in the Exploitation of Resources and Marginal Reserves of Hydrocarbons at Nationwide;
    • "Glossary, Acronyms and Abbreviations of the Hydrocarbons Subsector", approved by Supreme Decree No. 032-2002-EM

    Environmental

    • Law No. 28611, General Environmental Law;
    • Law No. 28245, Framework Law of the National Environmental Management System;
    • Regulation of Law No. 28245, Framework Law of the National Environmental Management System, approved by Supreme Decree No. 008-2005-PCM;
    • Regulation for Environmental Protection in Hydrocarbons Activities, approved by Supreme Decree No. 015-2006-EM;
    • Regulation of Citizen Participation to carry out Hydrocarbons Activities, approved by Supreme Decree No. 012-2008-EM;
    • Guidelines for Citizen Participation in Hydrocarbons Activities, approved by Ministerial Resolution No. 571-2008-MEM/DM;
    • Law No. 29785, Law of the Right to Prior Consultation to Indigenous or Native Peoples, recognised in the Convention 169 of the International Labour Organization (ILO); 
    • Supreme Decree No. 001-2012-MC, Regulation of Law No. 29785, Law of the Right to Prior Consultation to Indigenous or Native Peoples, recognised in the Convention 169 of the International Labour Organization (ILO.) 

    Natural Gas

    • Law No. 27133, Law of Promoting the Development of the Natural Gas Industry;
    • Regulation of Law of Promoting the Development of the Natural Gas Industry, approved by Supreme Decree No. 040-99-EM;
    • Supreme Decree No. 031-2003-EM, Amend article 2 of the Regulation of the Law of Promoting the Development of the Natural Gas Industry;
    • Law No. 28552, Law that amends the Law Nº 27133, Law of Promoting the Development of the Natural Gas Industry, establishing operative conditions for a greater use of the Natural Gas produced at national level;
    • Supreme Decree No. 048-2009-EM, Issue Regulatory Rules of the Law No. 28552;
    • Supreme Decree No. 079-2009-EM, Supreme Decree that amends the Regulation of the Law No. 27133, Law of Promoting the Development of the Natural Gas Industry, approved by Supreme Decree No. 040-99-EM;
    • Supreme Decree No. 039-2010-EM, Establish minimum value for the natural gas royalty in case of export.
  3. 2.

    Are oil and gas activities carried out by the state or a state-owned agency or national oil company?

  4.  Oil and gas activities are carried out by both the state and the private sector. Petroperu, the national oil company, went through a period of privatisation in the 1990s and it is currently solely a downstream player. Petroperu is responsible for the North Peruvian oil pipeline, five refineries, oil product distribution and retail stations that it franchises. The private sector is currently responsible for all upstream activity in Peru and competes with Petroperu in the downstream sector.

    The 2006 Petroperu Strengthening and Modernisation Law No. 28840 permits Petroperu to return to the upstream sector. Petroperu is seeking to re-emerge as a fully integrated E&P company and is currently seeking a partner for block 192.

  5. 3.

    Is oil and gas a regulated business that can only be carried out by companies that are licensed or that receive government concessions to operate?

  6. Oil and gas activities are highly regulated in Peru. Petroperu and the private sector may only carry out oil and gas activities through a variety of governmental authorisations. Perupetro, the upstream regulator, issues exploration and production contracts after either a public bidding process or direct negotiation. These contracts are approved by a supreme decree issued by the Peruvian Ministry of Economy and Finance and the Peruvian Ministry of Energy and Mines.

    Downstream activities, generally speaking, require permits issued by Osinergmin (Supervisory Agency for Investment in Energy and Mining).

  7. 4.

    Identify the regulatory agencies charged with regulating oil and gas activities in your country and describe the role each agency plays in regulating such activities. 

  8. Perupetro is the state-owned company that promotes, negotiates, signs and supervises exploration and production contracts, on behalf of the Peruvian State.

    Peruvian Ministry of Energy and Mines

    This is the central and governing body for the Energy, Hydrocarbons and Mining Sector, a part of the Executive Branch. Its purpose is to formulate and assess national policy in matters of sustainable development in mining hydrocarbon-power activities. It is the governing authority in environmental matters in reference to hydrocarbons-mining-energy activities. 

    • The partial or total transfer of a contractor’s interest must be approved by the Ministry of Energy and Mines;
    • The General Hydrocarbons Department (DGH) is responsible for authorising principle pipelines, recollection and injection systems, own-use pipelines;
    • The General Bureau of Energetic Environmental Affairs (GBEEA) of the Ministry of Energy and Mines is in charge of some of the administrative proceedings related to prior consultation with indigenous peoples for natural resource exploitation projects.

    Osinergmin

    This is the regulatory, supervisory body that regulates, enforces and oversees the activities undertaken by internal public-or-private-law legal entities and individuals in the electricity, hydrocarbons and mining sub-sectors. It:

    • supervises and ensures compliance with legal and technical provisions related to the safety and operations of Hydrocarbon activities;
    • provide reference prices for oil products;
    • establishes pipeline tariffs; and
    • establishes distribution tariffs.

    Ministry of Environment

    This is the nation’s environmental authority, the overseeing entity of the National Environmental Management System (SNGA), and a part of the Executive Branch. Its main functions are focused in promoting environmental sustainability by preserving, protecting, recovering and securing the environment, ecosystems and natural resources. 

    Peruvian Ministry of Economy and Finance

    The Ministry of the Economy and Finance is an entity of the Executive Branch responsible for planning, directing and controlling matters related to the budget, treasury, debt, accounting, fiscal policy, public spending, and economic and social policies. It also designs, establishes, performs and supervises national and sector policies under its competence, assuming a guiding role therein. 

    It issues supreme decrees with the Ministry of Energy and Mines formalising upstream concessions.

    The National Institute of the Defence of Competition and Intellectual Property Protection (INDECOPI) is the Peruvian competition authority.

  9. 5.

    Are all hydrocarbons in your country deemed to be originally owned by the state? If so, when does ownership transfer to the extractor or buyer of the hydrocarbons?

  10. Article 66 of the Peruvian Constitution establishes that natural resources, renewable and non-renewable, are the patrimony of the Nation and that concessions maybe granted, which grant the holder a property right.

    Under the terms of the service contract, all hydrocarbons produced in the contract area are owned by Perupetro.

    Under the terms of a licence contract, ownership rights on hydrocarbons produced in an area are assigned to the contractor by Perupetro. In return, the contractor must pay a royalty on the value of the hydrocarbons.

  11. 6.

    How are oil and gas exploration and production rights or concessions granted? Is there more than one method for granting such rights (ie, concession and joint exploration agreements) or co-existing regimes applicable to different exploration or production areas?

  12. Article 10 of the Organic Hydrocarbons Law permits three contractual forms of conducting hydrocarbon exploration and production:

    • License contract between Perupetro and a contractor whereby the contractor obtains the permission to explore and exploit or exploit hydrocarbons in the contract area.
    • Services contract between Perupetro and a contractor whereby the contractor exercises the right to carry out exploration and production of Hydrocarbons in the contract area, and receives compensation according to the production.
    • Other contracting modalities authorised by the Ministry of Energy and Mines.

    All of the exploration contracts awarded since 1993 have been licence contracts.

  13. 7.

    Is there a public bidding or similar process for oil and gas exploration and production licences? If so, is it open to foreign companies and investors?

  14. Perupetro holds international bidding rounds for exploration and production contracts. Perupetro can also directly negotiate contracts in the following situations:

    • as a result of a Technical Evaluation Agreement;
    • at the proposal of an Oil Company; and
    • at the proposal of Perupetro.

    Foreign investors are able to sign licenses and service contracts and carry out oil and gas exploration and production activities but they must establish a corporation (subsidiary or affiliate) or a branch in Peru (article 15 Organic Hydrocarbons Law).

  15. 8.

    Are there any minimum local content requirements related to international bidding processes?

  16. There are no minimum local content requirements in the bidding process.

  17. 9.

    Are there any minimum capital or technical requirements related to international bidding processes?

  18. To hold petroleum rights the applicant must satisfy Perupetro that it is qualified to do so. For the licence rounds 2004 Qualification Regulations issued by Supreme Decree No. 030-2004-EM and modified by Supreme Decree No. 001-2012-EM establish legal, technical and economic requirements based upon E&P activity and the companies’ economic performance in the last three years. 

    For an oil company to request direct negotiation from Perupetro the applicant must comply with at least one of the following conditions:

    • evidence to the satisfaction of Perupetro’s Management, evidence its higher superior technical capacity and financial backing to the satisfaction of Perupetro’s Management; or
    • inclusion as an oil and gas exploration and production company, or integrated oil and gas company, in Energy lntelligence Top 100: Global NOC & IOC Rankings of Energy lntelligence, "The Platts Top 250 Global Energy Company Rankings", or other similar publication approved by Perupetro.
  19. 10.

    Are there any restrictions on foreign participation in such rights or concessions or in companies holding any such rights?

  20. Foreign investment can be made in Peru under conditions that are equal to domestic investment and is not subject to compliance with any performance requirements. As such, there is no foreign investment restriction on exploration and production activities nor on foreign participation in such rights or concessions, or in companies holding any such rights. Articles 13 and 14 of the Organic Hydrocarbons Law specifically state natural persons or corporations, domestic or foreign, may enter into contracts throughout the national territory.

  21. 11.

    Are there any restrictions on the participation in such rights or concessions by state-owned entities or local national oil companies?

  22. There are no such restrictions.

  23. 12.

    Are companies or consortia that are awarded exploration and production rights given priority to operate and exploit the corresponding oil and gas fields? If so, how is such priority structured and documented?

  24. For a licence or service contract the licensees or contractors have the exclusive right to operate and exploit the corresponding oil and gas fields.

    Technical evaluation agreements may be entered with Perupetro that allow companies to explore frontier blocks for hydrocarbons potential. Article 7 of the model technical evaluation agreement grants the contractor the first right to negotiate and sign a licence agreement for the exploration and production of hydrocarbons with Perupetro. To take up this option the contractor must first have complied with all of its obligations under the technical evaluation agreement. Upon notifying Perupetro of its decision to execute its right, the contractor enters into a direct negotiation process.

  25. 13.

    What rights does the holder of an exploration and production licence or concession have to the hydrocarbons discovered during exploration and subsequently produced? 

  26. The licence contract grants the contractor title to produced petroleum while the reserves remain the property of the state.

    The contractor has the right to use the hydrocarbons produced in the contract area in its operations at no cost.

    The contractor has the right to recover liquid hydrocarbons from any natural gas produced in a contract area and extract them at any stage of handling.

  27. 14.

    May a holder of an exploration and production licence or concession transfer such right?

  28. Article 17 of the Organic Hydrocarbons Law permits assignment subject to approval by Supreme Decree countersigned by the Ministers of Economy and Finance and Energy and Mines. Article 14 of the model license contract incorporates the right of transfer, subject to Perupetros approval.

  29. 15.

    Who has title to assets imported to develop and produce hydrocarbons, including any technology or expertise provided by foreign participants in the local oil and gas sector? 

  30. The contractor is authorised to import, either permanently or temporarily, in accordance with current legislation, any goods necessary for the economic and efficient execution of upstream operations. The title for such items remains with the contractor.

  31. 16.

    How are federal, state and local governments recompensed for granting companies rights or concessions to conduct oil and gas exploration and production?

  32. Licence contracts are the usual form of contracting in Peru and the federal government is compensated via a royalty placed on production and income tax provisions. The 1993 Royalty Regulations, issued by Supreme Decree No. 049-93-EM and amended by Supreme Decree No. 017-2003-EM, provide for the royalty rates to be based on: 

    • R-factor methodology (minimum royalty rates in the range 15 per cent to 35 per cent with final percentages subject to negotiation) applied to a contract;
    • cumulative production per oil field (rather than contract) with Adjustment for Price Methodology;
    • daily production methodology (5 per cent fixed royalty rate rising to a maximum of 20 per cent based on average daily production levels); and
    • economic results methodology (5 per cent fixed royalty rate plus a variable royalty in the range zero per cent to 20 per cent determined by an R-factor).

    The model licence contract incorporates R-factor royalties and applies the minimum percentages established in the Royalty Regulations with an additional amount “X” that is to be negotiated (article 8.3).

    Factor “R”

    Royalty (%)

    From 0.0 to less than 1.0

    (15 + X) %

    From 1.0 to less than 1.5

    (20 + X) %

    From 1.5 to less than 2.0

    (25 + X) %

    2.0 or more

    (35 + X) %

    Royalty is deductible for income tax purposes (article 45 Hydrocarbons Law No. 26221).

    In service contracts the federal government is compensated through the sale of the production of hydrocarbons less a negotiated share of gross production paid to the contractor. The contractor pays income tax on its net income from its contractual share of production.

  33. 17.

    May companies or consortia that hold oil and gas exploration and production rights compulsorily acquire property or rights of way to carry out exploration or production activities? Are these compulsory acquisitions governed by special judicial or administrative proceedings?

  34. Article 84 of the Organic Hydrocarbons Law allows a contractor to request of the Ministry of Energy and Mines the expropriation of private lands. The Ministry of Energy and Mines shall study the request and, should it be declared pertinent and duly supported, such expropriations shall be considered as matters of national and public need and the expropriation procedures over the area involved shall be started as per Law. The expropriation procedure is an administrative procedure.

  35. 18.

    Are natural gas exploration and production activities regulated separately or subject to the same regulation applicable to oil exploration and production? Are there different royalties or other government charges payable by companies that conduct natural gas exploration and production activities?

  36. Natural gas and oil exploration and production activities are generally subject to the same regulations in Peru. Within the regulations; however, there are specific rules that apply to natural gas, for example:

    • the production phase lasts up to 30 years for oil and 40 years for natural gas (article 3.1 model licence);
    • a discovery declared non-commercial due to lack of transport infrastructure may be retained for five years for oil (article 3.6 model licence) or 10 years for gas (article 3.7 model licence) which extends the contract period (article 3.9 model licence);
    • oil is to be valued on a basket of up to four similar crudes (article 8.4.1 model licence) while gas is valued by its sale price (article 8.4.4 model licence); and
    • the model licence contract has separate articles for natural gas and oil royalties and companies may negotiate different rates.
  37. 19.

    Do foreign ownership restrictions apply to the oil and gas sector in your country?

  38. No foreign ownership restrictions apply.

  39. 20.

    Are there any minimum domestic participation rules or any labour law rules relating to domestic and foreign workers?

  40. Foreign workers who enter into Peru need to submit their work contract for approval to the Labour Authorities, and obtain their work visa. These employees have the right to receive the same labor benefits as Peruvian employees, and are subject to the same taxes and contributions. Employers are required to distribute a share of their profits among their employees. An ambiguity in the law exists whether five or eight percent of profits should be distributed and many oil and gas companies calculate this employee benefit using the five percent rate. This has been a matter of discussion at the judiciary level. 

    As a rule, foreign employees should not exceed 20 per cent of total personnel. Additionally, wages paid to foreign employees should not exceed 30 per cent of total payroll cost. Such limits may be waived for professionals and specialised technicians or management personnel of a new entrepreneurial activity. 

    After five years of commercial production, article 12 of the model licence contract requires the contractor to have replaced all foreign personnel with Peruvian personnel except for foreign personnel in management positions and those necessary for specialist technical work related to the operations.

  41. 21.

    Are there any limitations on vertical integration in the oil and gas industry in your country?

  42. While Peruvian legislation provides no specific limitations on vertical integration in the oil and gas industry general competition legislation applies. Chapter IV of Legislative Decree No. 1034, Antitrust Law, specifically prohibits vertical collusive practices, which are defined as agreements, decisions, recommendations or concerted practices carried out by economic agents operating in different levels of the production, distribution or commercialisation chain, aiming to restrict, prevent or distort the free competition.

  43. 22.

    Are oil and gas activities carried out through incorporated entities with limited liability or by consortia or other types of unincorporated joint ventures? Are joint venture partners jointly and severally liable for the obligations undertaken in connection with such activities?

  44. The most common types of legal organisations used by foreign investors for doing business in Peru are a corporation (SA) and a limited-liability company (RL). The corporation is a popular form of business organisation used by foreign investors in Peru since shareholder liability is limited to the amount contributed to the corporation. In a limited-liability company or SRL partners are not personally liable for the corporation’s liabilities. Both corporations and limited-liability companies require a minimum of two partners and are subject to similar registration procedures, reporting and accounting requirements. The Peruvian Corporation Act also provides other forms of legal entities including the closely held corporation (sociedad anónima cerrada) and the open stock company (sociedad anónima abierta), these are less common in Peru's oil and gas sector. 

    Foreign companies can also establish a Peruvian branch of their company for carrying out oil and gas exploration and production activities. A branch does not have legal independence or legal personality distinct from its parent company, except for tax purposes. Therefore, a branch is regulated by the parent company’s by-laws. 

    Business activities in the hydrocarbon sector carry a high risk and it is very common for companies to share this risk by jointly working on a project. Peru has three forms of associative agreements that act as vehicles to achieve this: partnership contracts, consortiums and joint ventures. Associative agreements do not create a corporation or legal entity different from its associates and each of the parties keep their legal personality and patrimonial independence. While the parties will assign an operator responsible for conducting the activities, all of the parties are jointly and severally liable for the assumed contractual obligations (article 16, Organic Hydrocarbons Law).

  45. 23.

    May oil and gas reserves be pledged or encumbered to secure the repayment of debt? How?

  46. Oil and gas reserves belong to the state, thus they cannot be pledged or encumbered to secure the repayment of debt before their extraction. However, in the case of licence contracts, once the oil or gas is produced in accordance with the respective agreement, title is transferred to the contractor and the hydrocarbons may be sold, pledged or encumbered.

  47. 24.

    Can oil and gas rights that are subject to a lien be sold or transferred freely by the secured creditor? What issues, if any, do secured creditors face in enforcing liens on oil and gas rights?

  48. Since oil and gas reserves belong to the state no lien can exist over them.

  49. 25.

    Is oil and gas output freely exportable in your country? Are there any limits or quotas applicable to oil and gas production? Is there access to export pipelines? What licences are required for oil and gas exports? Are duties or tariffs applicable?

  50. Contracts entered into prior to the enactment of the 1993 Organic Hydrocarbons Law required oil to be sold on the domestic market, at international market prices, until domestic demand was fully satisfied. With the enactment of the Organic Hydrocarbons Law this altered and article 39 grants contractors the right to freely export all hydrocarbons to which it is entitled under the contract. Article 41 further provides that a contractor whose payment is to be made in cash shall have the right, in case the contracting party does not comply with the payments, to sell in the domestic or foreign market a volume of production from the contract area sufficient to cover the amount of the debt.

  51. 26.

    Are prices for oil and gas set or fixed by the government?

  52. Oil and gas prices in Peru are set by the open market. This is established by article 77 of the Organic Hydrocarbon Law, which establishes that the activities and prices related to crude oil and by-products are ruled by supply and demand.

    Royalty legislation contained in article 3 of Supreme Decree No. 049-93-EM establishes that the value of the Hydrocarbons Fiscalised Production will be at international prices based on a hydrocarbons basket agreed by the parties in each contract.

    The model licence contract establishes that oil is to be valued on a basket of up to four similar crudes (article 8.4.1) while gas is valued by its sale price (article 8.4.4).

  53. 27.

    Are oil and gas exports taxed under the general income tax regime or is there specific hydrocarbons tax legislation?

  54. Hydrocarbon exports are free from any tax (article 39, Organic Hydrocarbons Law).

  55. 28.

    Do special environmental rules apply to oil and gas exploration and production?

  56. While the General Environmental Law, No. 28611 applies to hydrocarbon activities additional legislation also applies from the Regulation for Environmental Protection in Hydrocarbons Activities, approved by Supreme Decree No. 015-2006-EM. Before initiating any hydrocarbon activity likely to cause environmental impacts, such as seismic exploration, drilling of exploratory and development wells, construction of production facilities, etc, an approved Environmental Impact Study (EIS) is required. Depending on the type of hydrocarbon activity potentially, the EIS may instead need to be a Detailed Environmental Impact Study (DEIS) or a Semi-detailed Environmental Impact Study (SEIS). The EIS evaluates and determines the prevention, minimisation, mitigation and remediation of possible negative environmental impacts. Likewise, it specifies the management of waste and effluent that may arise during the project.

    The Environmental Certification National Service for Sustainable Investment (SENACE) is the public entity in charge of approving the studies and forms part of the Ministry of Environment. For oil and gas activities, the competent authority for protection and environmental conservation is the GBEEA.

    Similar to environmental legislation general legislation on Prior Consultation is complemented by Regulation of Citizen Participation to carry out Hydrocarbons Activities, approved by Supreme Decree No. 012-2008-EM.

  57. 29.

    Are environmental regulations in your country consistent with any international standards?

  58. Environmental regulations in Peru are consistent with international standards with American Petroleum Institute (API) norms widely used. The Regulation of the activities of Hydrocarbons Exploration and Exploitation approved by Supreme Decree 032-2004-EM, provides a set rules and standards that have to be applied in the hydrocarbons exploration and exploitation operations in Peru, including the API and the National Fire Protection Association of the United States.

  59. 30.

    Do special health and safety rules apply to oil and gas exploration and production?

  60. Safety measures and environmental impact assessment applications for conducting exploitation activities must be carried out in accordance with the Environmental Protection Regulations for Hydrocarbon Activities (Supreme Decree No. 015-2006-EM Environmental Protection Regulations). Furthermore, the Regulation of Exploration and Exploitation of Hydrocarbons Activities, approved by Supreme Decree No. 032-2004-EM, establish health, safety and environment provisions related to upstream operations.

  61. 31.

    Must companies that participate in the oil and gas industry obtain special environmental or other government permits (other than licences or concessions to carry out oil and gas exploration and production) to operate in your country?

  62. In addition to the environmental licences mentioned earlier, a company must be qualified as a contractor by Perupetro. This qualification requires a company to show that it is legally, technically, economically and financially qualified to engage in obligations, regulations and investments required for developing the hydrocarbon activity. 

    The Law on Prior Consultation to Indigenous or Native Communities implements Convention 169 of the International Labor Organization, ratified by Peru in 1993. The law establishes that indigenous communities must be consulted before the approval of any law or administrative measure that may affect their collective rights, physical existence, cultural identity, quality of life or development. The law also stipulates that the indigenous communities must be previously consulted on any plan, programme and project of national or regional development that may affect their rights. The state or the relevant state entity, are responsible for the consultation process and for the final approval of the law or administrative measure in consultation. If the communities do not agree with such approval they could challenge it before administrative of judicial instances.

  63. 32.

    Does the government (including any development banks or agency) provide financing, subsidy or other support to companies undertaking oil and gas exploration or production?

  64. The government supports the oil and gas sector via providing various tax exemptions to exploration or production activities.

  65. 33.

    Are there any tax stability or similar regimes available to foreign investors undertaking investment in the oil and gas industry in your country?

  66. While oil and gas operations are subject to the standard tax regime applied in Peru a stability provision exists so the tax regime on the date of signature will be applied throughout the contract period. Corporate income tax is currently levied at 31.5 on revenue less operating costs, royalty and depreciation. This is comprised of the general 29.5 per cent corporate income tax (Supreme Decree No. 1261 10 December 2016) plus a further 2 per cent for hydrocarbon contracts benefitting from a stability provision (article 1, Law 27343, 2000). The stability provision covers: 

    • income tax and taxes that affect profit distributions arising from the contract activities (ie, dividend tax or branch profits tax);
    • indirect taxes (Value Added Tax, Municipal Promotion Tax, and Selective Consumption Tax), but only as to its transferable nature;
    • tax exemptions and other tax benefits, but subject to the term and conditions established in the provision that contain such benefits; and
    • tax recovery regimes, temporal admission regimes, export regimes and other related items.
  67. 34.

    Are oil and gas activities generally protected under bilateral investment treaties entered into by your country?

  68. Peru has various tax treaties to prevent the double taxation of companies operating in Peru and elsewhere. Peru has entered into a multilateral tax treaty with the Andean Community countries (Bolivia, Colombia and Ecuador) and double tax treaties with countries including Brazil, Chile, Canada, Mexico, South Korea, Portugal and Switzerland. 

    Except for the double tax treaty with the other Andean Community countries, tax treaties entered into by Peru generally follow the OECD Model. Each tax treaty differs and companies are advised to review each relevant treaty. Peru has also signed 33 Bilateral Reciprocal Investment Promotion and Protection Agreements and 11 free trade agreements.

  69. 35.

    Are there any dispute resolution systems specific to the oil and gas industry? Does state immunity apply in such disputes?

  70. Foreign investors are protected against inconvertibility, expropriation, political violence and other non-commercial risks through access to the corresponding multilateral and bilateral conventions such as the Overseas Private Investment Corporation and the Multilateral Investment Guaranty Agency.

    Peru is also a member of the International Convention for Settlement of International Disputes that provides an alternative to settle disputes arising between the government and investors.

  71. 36.

    Do anti-corruption or anti-money laundering rules apply to the oil and gas industry in your country? If so, what is the impact of breach of the regulations on hydrocarbon exploration and exploitation activities?

  72. Peru applies various anti-corruption rules to both public and private sectors and Perupetro publish all oil and gas contracts to provide transparency. The Inter-American Convention against Corruption was adopted by Peru through Supreme Decree No. 012-97-RE and through Supreme Decree No. 075-2004-RE ratified the United Nations Convention against Corruption.

    Specific anti-corruption norms in Peru include Law No. 27806 – Law of Transparency and Access to the Public Information, Law No. 27815 - Law of the Code of Ethics, Supreme Decree No. 046-2013-PCM approving the Anticorruption Strategy of the Executive Branch, Law No. 29976 – creating the Anticorruption Commission, and recently the National Policy on Integrity and Fight against Corruption was enacted in September 2017 through Supreme Decree No. 092-2017-PCM.

  73. 37.

    Has your jurisdiction adopted any legislation or regulations governing the exploitation of shale gas (fracking)? Are any special licences or environmental permits required for such activities?

  74. In 2014, the Peruvian Ministry of Energy and Mines announced it would promote the development of unconventionals including shale gas. While no specific legislation has been enacted in July 2017, draft Regulations for Exploration and Exploitation of Hydrocarbons were released, which defined Hydraulic Fracturing and Non-Conventional Reserves making it probable further legislation will cover this matter.

  75. 38.

    Has your jurisdiction adopted any legislation or regulations governing ultra-deep-water exploration or drilling activities? Are any special licences or environmental permits required for such activities?

  76. While no specific legislation has been enacted concerning ultra-deep-water exploration or drilling activities, the draft Regulations for Exploration and Exploitation of Hydrocarbons released in July 2017 defined Ultra Deep Water making it probable further legislation will cover this matter.

  77. 39.

    Have there been any recent material amendments to the laws, rules or regulations governing hydrocarbon exploration and exploitation? Have any new laws, rules or regulations governing hydrocarbons exploration and exploitation been passed in your jurisdiction?

  78. As mentioned above, oil and gas legislation in Peru is currently going through a period of review and this includes the central piece of legislation, the Organic Hydrocarbons Law as well as its supporting legislation. Several proposed pieces of legislation have been published in order to receive comments and some of the updated legislation is expected to be enacted shortly.

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Questions

  1. 1.

    What is the legislation applicable to oil and gas activities in your country? Is it federal or state legislation, or both?


  2. 2.

    Are oil and gas activities carried out by the state or a state-owned agency or national oil company?


  3. 3.

    Is oil and gas a regulated business that can only be carried out by companies that are licensed or that receive government concessions to operate?


  4. 4.

    Identify the regulatory agencies charged with regulating oil and gas activities in your country and describe the role each agency plays in regulating such activities. 


  5. 5.

    Are all hydrocarbons in your country deemed to be originally owned by the state? If so, when does ownership transfer to the extractor or buyer of the hydrocarbons?


  6. 6.

    How are oil and gas exploration and production rights or concessions granted? Is there more than one method for granting such rights (ie, concession and joint exploration agreements) or co-existing regimes applicable to different exploration or production areas?


  7. 7.

    Is there a public bidding or similar process for oil and gas exploration and production licences? If so, is it open to foreign companies and investors?


  8. 8.

    Are there any minimum local content requirements related to international bidding processes?


  9. 9.

    Are there any minimum capital or technical requirements related to international bidding processes?


  10. 10.

    Are there any restrictions on foreign participation in such rights or concessions or in companies holding any such rights?


  11. 11.

    Are there any restrictions on the participation in such rights or concessions by state-owned entities or local national oil companies?


  12. 12.

    Are companies or consortia that are awarded exploration and production rights given priority to operate and exploit the corresponding oil and gas fields? If so, how is such priority structured and documented?


  13. 13.

    What rights does the holder of an exploration and production licence or concession have to the hydrocarbons discovered during exploration and subsequently produced? 


  14. 14.

    May a holder of an exploration and production licence or concession transfer such right?


  15. 15.

    Who has title to assets imported to develop and produce hydrocarbons, including any technology or expertise provided by foreign participants in the local oil and gas sector? 


  16. 16.

    How are federal, state and local governments recompensed for granting companies rights or concessions to conduct oil and gas exploration and production?


  17. 17.

    May companies or consortia that hold oil and gas exploration and production rights compulsorily acquire property or rights of way to carry out exploration or production activities? Are these compulsory acquisitions governed by special judicial or administrative proceedings?


  18. 18.

    Are natural gas exploration and production activities regulated separately or subject to the same regulation applicable to oil exploration and production? Are there different royalties or other government charges payable by companies that conduct natural gas exploration and production activities?


  19. 19.

    Do foreign ownership restrictions apply to the oil and gas sector in your country?


  20. 20.

    Are there any minimum domestic participation rules or any labour law rules relating to domestic and foreign workers?


  21. 21.

    Are there any limitations on vertical integration in the oil and gas industry in your country?


  22. 22.

    Are oil and gas activities carried out through incorporated entities with limited liability or by consortia or other types of unincorporated joint ventures? Are joint venture partners jointly and severally liable for the obligations undertaken in connection with such activities?


  23. 23.

    May oil and gas reserves be pledged or encumbered to secure the repayment of debt? How?


  24. 24.

    Can oil and gas rights that are subject to a lien be sold or transferred freely by the secured creditor? What issues, if any, do secured creditors face in enforcing liens on oil and gas rights?


  25. 25.

    Is oil and gas output freely exportable in your country? Are there any limits or quotas applicable to oil and gas production? Is there access to export pipelines? What licences are required for oil and gas exports? Are duties or tariffs applicable?


  26. 26.

    Are prices for oil and gas set or fixed by the government?


  27. 27.

    Are oil and gas exports taxed under the general income tax regime or is there specific hydrocarbons tax legislation?


  28. 28.

    Do special environmental rules apply to oil and gas exploration and production?


  29. 29.

    Are environmental regulations in your country consistent with any international standards?


  30. 30.

    Do special health and safety rules apply to oil and gas exploration and production?


  31. 31.

    Must companies that participate in the oil and gas industry obtain special environmental or other government permits (other than licences or concessions to carry out oil and gas exploration and production) to operate in your country?


  32. 32.

    Does the government (including any development banks or agency) provide financing, subsidy or other support to companies undertaking oil and gas exploration or production?


  33. 33.

    Are there any tax stability or similar regimes available to foreign investors undertaking investment in the oil and gas industry in your country?


  34. 34.

    Are oil and gas activities generally protected under bilateral investment treaties entered into by your country?


  35. 35.

    Are there any dispute resolution systems specific to the oil and gas industry? Does state immunity apply in such disputes?


  36. 36.

    Do anti-corruption or anti-money laundering rules apply to the oil and gas industry in your country? If so, what is the impact of breach of the regulations on hydrocarbon exploration and exploitation activities?


  37. 37.

    Has your jurisdiction adopted any legislation or regulations governing the exploitation of shale gas (fracking)? Are any special licences or environmental permits required for such activities?


  38. 38.

    Has your jurisdiction adopted any legislation or regulations governing ultra-deep-water exploration or drilling activities? Are any special licences or environmental permits required for such activities?


  39. 39.

    Have there been any recent material amendments to the laws, rules or regulations governing hydrocarbon exploration and exploitation? Have any new laws, rules or regulations governing hydrocarbons exploration and exploitation been passed in your jurisdiction?


Other chapters in Oil and Gas

  • Bolivia
    Quintanilla, Soria & Nishizawa Soc. Civ Becerra de la Roca Donoso & Asociados (BDA Abogados) Law Firm
  • Brazil
    Campos Mello Advogados (in Cooperation with DLA Piper)
  • Colombia
    Chalela Abogados
  • Dominican Republic
    Coiscou & Associates, Attorneys at Law
  • Mexico
    Nader, Hayaux y Goebel SC
  • Peru
    Canales Auty
  • Venezuela
    D'Empaire