American Banks Lead Project Financing for Petroperú’s Talara Refinery

JPMorgan Chase, HSBC Securities (USA), Bank of America, Santander Investment Securities Inc, Citibank, and Goldman Sachs lent over $4.7 billion USD to Petroperú between 2017 and 2021, leading the $5.8 billion USD in project financing in loans and bonds for Petroperú’s upgrade of the Talara Refinery.

The Talara refinery plans to process the oil from Petroperú’s oil blocks in the Peruvian Amazon, including Block 192 and Block 64, where oil and gas extraction is fiercely opposed by the Wampis Nation and Achuar People of the Pastaza. These blocks are connected to Talara via the aging Norte Peruviano Pipeline. Given the cost overruns of the project and the decrepit state of the pipeline, Petroperú must expand oil drilling operations in the Amazon in order to produce enough to cover its debts.

Petroperú restarting operations

The upgrade is scheduled for completion in 2023, after which it will process an estimated 95,000 barrels of oil per day. Petroperú is also gearing up to restart operations on Block 192 after it was abandoned by Pluspetrol in 2015 and suspended by Frontera in 2021. Block 192 has a long history of pollution and poor management starting with Occidental Petroleum and continuing with Pluspetrol and Frontera — none of which has been properly remediated. Indigenous communities left to suffer the health and environmental consequences have opposed operations on the block but have recently accepted oil operations after complex negotiations over remediation and compensation, although remediation activities are far from complete. Block 192 is estimated to produce 10,000 barrels per day when fully functional, or about 10% of the total daily capacity of the Talara refinery after upgrades.

It is easy to see the connection between American banks financing Talara’s upgrade and Petroperú’s oil and gas expansion in the Amazon, and it was not unforeseeable when banks decided to finance the project.

It is easy to see the connection between American banks financing Talara’s upgrade and Petroperú’s oil and gas expansion in the Amazon, and it was not unforeseeable when banks decided to finance the project. The pull of all that debt now makes oil expansion harder for Indigenous communities to resist, while the legacy of oil spills on the pipeline and in Block 192 spells a grim future for the Peruvian Amazon. Banks wishing to reverse course on this disaster should develop debt for nature swaps that would reduce oil expansion pressure in Amazonia to pay back Peru’s creditors.

This is a case study on American Banks’ Financing for Petroperú’s Talara Refinery from the 2023 Capitalizing on Collapse report.