February 14, 2019 / 10:02 PM / a month ago

UPDATE 1-Frontera Energy rethinking Peru due to pipeline problems

(Adds government response, additional comments from chief executive)

LIMA, Feb 14 (Reuters) - Canadian oil junior Frontera Energy Corp is reconsidering pursuing new investments in Peru due to government delays in fixing a key pipeline, the company’s chief executive said on Thursday.

Richard Herbert added that Frontera might withdraw from its main oilfield in the country if the pipeline - run by state-owned Petroperu - remains inoperative for several more months.

The four-decade old pipeline is needed to transport crude from oilfields in the Peruvian Amazon, including Frontera’s Block 192, to the Pacific coast. But it has been offline since late November, when Petroperu said it was severed by members of an indigenous community in a dispute related to local elections.

Frontera has lost $10 million because of the problem and is now producing “almost nothing” from Block 192, Herbert said.

Petroperu declined to comment. It has previously said that the native community of Mayuriaga has blocked its workers from fixing the pipeline. Community representatives could not immediately be reached.

“If we have to wait months and months, we might reach the point where we can’t tolerate more losses,” Herbert told a news conference in Lima.

“It’s getting harder and harder for me to persuade Frontera’s board of directors to consider future investments in the country when we have so many problems” and other countries are becoming more attractive, Herbert said.

Herbert said Frontera plans to submit a bid on an oil block in Ecuador next month and is looking at potential new investments in Colombia.

Peru’s Deputy Minister of Territorial Governance Raul Molina, who has led the government’s efforts to end the conflict, said his team is close to a deal with local leaders to open passage for Petroperu to repair the pipeline.

“We are absolutely committed to finding a solution,” Molina said by phone. He added that talks have taken so long because the community has a long list of demands to discuss and the government does not want to unleash a violent conflict by breaking the blockade by force.

Peru is a relatively small oil player in Latin America.

Frontera started operating Peru’s largest oil block, 192, in the Amazonian region of Loreto, under a 2-year service contract in 2015.

The contract has been repeatedly extended to compensate for periods in which Frontera was unable to operate due to problems with the pipeline, and is now set to expire in September.

Frontera, which also operates a small offshore oil block in Peru, previously said it was interested in a long-term contract for Block 192.

Reporting by Mitra Taj Editing by Phil Berlowitz and Susan Thomas

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