"Decline in royalties from Peruvian hydrocarbons presents challenges and opportunities."

In a complicated economic context, the hydrocarbons industry in Peru is facing a notable decline in royalty payments to the state during the first half of 2024. According to the National Society of Mining, Petroleum, and Energy (SNMPE), royalties paid by companies in the sector fell by 11.8%, reaching only US$ 579.44 million compared to the US$ 656.71 million reported in the same period the previous year. This decline raises questions about the health of the industry and its implications for the national economy. The impact of this decrease is not just numerical; it has direct repercussions on the financing of state projects and on the government's ability to invest in infrastructure and public services. Royalties are a significant source of income for the state, and their drop could affect initiatives in crucial sectors such as education, health, and regional development. However, not all news is negative. Despite the downward trend in the first half of the year, June showed a slight rebound in royalties, reaching US$ 100.87 million. This amount represents an increase of 0.4% compared to June of the previous year, although it remains below the US$ 173.47 million recorded in the same month of 2022. This slight increase suggests that some companies are beginning to adjust to market conditions, although the overall outlook remains bleak. Breaking down the numbers for June, it is observed that of the US$ 100.87 million paid, US$ 47.93 million corresponds to natural gas exploitation, while US$ 21.10 million comes from oil and US$ 31.84 million from natural gas liquids production. The diversification of royalty sources is a positive aspect, although the industry's dependence on natural gas is becoming increasingly evident. On the other hand, the Ministry of Energy and Mines (Minem) has launched an initiative to supply ten hospitals in various regions of the country with natural gas, which could generate a new boost in demand for this resource. This plan aims not only to improve healthcare but also to increase production and, consequently, the royalties that companies in the sector could contribute to the state. Additionally, projects like that of Petrotal, which involves an investment of US$ 260 million in Loreto until 2042, could provide a respite for the local hydrocarbons industry. This investment, aimed at exploration and production, is essential for revitalizing a sector that has shown signs of weakness. The expectation is that projects of this magnitude will help stabilize royalty revenues in the future. However, political instability and environmental challenges continue to be significant obstacles to the sector's development. Companies face a constantly changing regulatory environment, which can lead to greater uncertainty in investments. The industry could benefit from a more predictable regulatory framework that encourages investment and responsible exploration of resources. The decline in royalties also highlights the need to diversify the Peruvian economy. Excessive dependence on hydrocarbons can be risky, and it is crucial to develop economic alternatives that can complement and eventually replace this source of income. The challenge is great, but the opportunity to innovate and adapt is also substantial. In conclusion, the outlook for hydrocarbons royalties in Peru is mixed. While the decline in revenues is a cause for concern, the slight rebound in June and ongoing projects offer a glimmer of hope. The industry, government, and civil society must work together to create a sustainable future that does not rely solely on hydrocarbons.