Peru will promote mining and oil exploration to guarantee investment and increase production as it faces growing domestic energy demand and global economic uncertainty, its new mine and energy minister said on Monday.
President Ollanta Humala’s government is also working on a new approach to solving social conflicts over mining and oil projects that threaten more than $50-billion (U.S.) in investment pledged in coming years.
“ We will build confidence in investors and our population,” said Mines and Energy Minister Jorge Merino, who took office in December after anti-mining protests prompted Humala to replace the majority of his cabinet after just five months in office.
Demonstrations by residents and political leaders from the northern region of Cajamarca have paralyzed construction on the largest mining investment ever announced in Peru, U.S.-based Newmont’s $4.8-billion Conga copper-gold project.
Humala’s new team has tried to calm tensions by promising to convene international experts to audit the mine’s environmental impact study, which the population rejects. The study had been approved by the previous government.
Merino said the government has not yet decided who will perform the audit.
“We have many mining projects in the pipeline and we want to have a very strong presence in terms of community relationships and the environment,” he said. “We want Peru to continue to be a competitive country for investment, especially in exploration.”
Many people oppose natural resource extraction in Peru, the world’s second-largest producer of copper and silver and No. 6 gold producer, because they have not benefited from development and fear new projects will contaminate scarce water resources.
Humala was elected in June after promising to placate more than 200 social conflicts and better distribute the fruits of a decade-long, commodities-led economic boom to the one in three Peruvians who have been left behind in poverty.
But he needs funds from mining projects to roll out his ambitious anti-poverty agenda.
Energy rethink Merino also promised to “rethink” Peru’s energy matrix to meet an expected spike in demand. The government will focus on developing hydropower, he said, particularly in northern Peru where there is an estimated capacity of over 12,000 megawatts.
“We think the country could need 500 more megawatts of energy each year,” he said.
The government also wants to encourage state enterprise in the energy sector, mirroring Humala’s priorities for Petroperu, the state oil company. He wants Petroperu to expand and start producing oil like Ecopetrol in neighboring Colombia. Petroperu could list on the local stock exchange as soon as April.
“Electroperu, for example, will have a very important role in promoting energy investments in the country,” Merino said.
Peru, which has vast natural gas reserves, is looking to accelerate investment in petroleum in the next five years and wants to attract large multinational companies to its nascent energy sector.
The government plans to hold an auction for some 30 petroleum blocks in the second half of the year.
“We hope major players will participate, we’re working hard to promote these lots,” Merino said. He didn’t say how much investment the auctions would attract.