Baron Oil has focused on the South American upstream business on Northern Peru for several reasons:

The Peruvian fiscal regime is relatively attractive, comprising a royalty and corporation tax. The Peruvian authorities have welcomed new oil companies without placing too rigorous criteria on them, with the intent of stimulating further investment.

The hydrocarbon basins of Northern Peru offer vast and largely overlooked potential, not only for new exploration, but also for lower risk development and infill drilling in more mature areas.

Northwestern Peru (Talara Basin and adjacent areas) has already produced some 1,600 million barrels of oil, but is estimated to have remaining potential for new reserves of 2,220 million barrels and 5.8 trillion cubic feet of gas (Gonzales and Alarcon 2002).

The potential for the development of new downstream markets, especially in the energy, agrochemical and gas sectors, is significant, and is viewed by Baron Oil as the commercial key to success in the event that gas reserves are proven in the course of its investment programme, rather than oil.

Drilling costs are low in this part of Peru, being in the region of $1.5 million for a typical onshore shallow well, as compared with European costs in excess of $3 million. In addition the desert of Northwestern Peru is relatively easily accessible for operations..

The political stability of Peru, its desire to attract new investment and its proximity to the North American "West Coast" market make long term investment here attractive.

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