Peru has signed the Paris Agreement and committed to develop policies to increase the share of renewable energy sources from current 5.5% to at least 20% by 2040. However, the country needs significant capital investments to ramp up its natural gas production and increase the share of low-carbon energy sources in the overall mix, says GlobalData, a leading data and analytics company.

Svetlana Doh, Oil & Gas Analyst at GlobalData, comments: “While electricity generation in the country is considered more or less clean, as it is sourced from natural gas and hydropower primarily, oil consumption by all the sectors altogether is high and roughly accounts for 50%. So, until other renewables sources could contribute the required amount of energy, growing natural gas production still stays very important in this transition period as its consumption could grow and partially replace oil utilization in industrial use, residential sector and power generation.”

The newly elected president of Peru, Pedro Castillo, appears strongly committed to support the involvement of private sector in energy projects. As per Peru’s National Energy Plan 2010-2040, the country has been establishing the legal framework that is aimed to promote and protect private investment in the sector.

Ms. Doh concludes: “When it comes to current projections regarding natural gas production in Peru, it is expected to grow by 3.4% next year from 1.16 billion cubic feet of gas (bcfd) to 1.20 bcfd in 2022. But, in 2023, production is expected to start declining at an average of 2.1% annually and reach 1.16 bcfd in 2025. Based on the National Energy Plan, the demand for natural gas will grow from approximately 1.6 bcfd in 2021  to at least 2.4 bcfd in 2025.

“Currently, gas is used in about 22% of the energy market in the country, and in order to get that share growing, under-explored gas areas in Peru need to be developed sooner rather than later. More aggressive exploration work needs to be conducted as there have been no significant discoveries in Peru since 2014, and offshore blocks are significantly under-explored.”