UK independent Baron Oil has decided to relinquish Block Z-34 located offshore Peru due to “impediments to activity” caused by the country’s lack of regulation.
Baron said on Friday that the decision was made on Thursday, November 9, after a unanimous vote by all parties eligible to vote on the matter.
The company added that the Peruvian oil and gas regulator PeruPetro would be informed of the decision.
“The block has been in Force Majeure since 2014, and under these circumstances, the Z-34 partners are entitled to exercise their right to relinquish Block Z-34 and, consequently, to request that the $3.6 million work program guarantee bond be released. If this is agreed, Baron expects to recover a substantial portion of the bond, free of tax,” the company said.
The block is 70 percent owned by Baron Oil’s subsidiary Gold Oil with the remaining 30 percent being held by Uruguay’s Union Oil and Gas Group (UOGG).
Bill Colvin, chairman of Baron, said: “The Z-34 group has been frustrated by the impediments to activity in Peru created by the lack of regulations relating to deepwater drilling and the need to change existing regulations to accommodate such activities. Although new legislation is promised shortly, we are of the view that activities will continue to face unexpected delays and additional expense, creating uncertainties that impact the economic evaluation of the prospects. We have therefore taken the difficult decision to relinquish the block.”
It is worth reminding that Baron Oil tried to farm-out the block through a deal that would make UOGG an owner of 80% of the stake. However, after UOGG failed to meet its financial obligations for the farm-in following the approval of the public deed in February 2017, Baron decided to terminate the farm-out agreement.
Offshore Energy Today Staff