Aug. 27, 2015

Germán Velásquez Salazar


Germán Velásquez Salazar

Chairman, Petroperu

TBY talks to Germán Velásquez Salazar, Chairman of the Board of Petroperu, on the company's main targets, its concessions, and the possible future tenders.


Germán Velásquez Salazar is a Senior Executive with strong experience in management and areas of finance, logistics, human resources, accounting, budgeting, treasury, and security in electric utilities (ELECTROPERÚ) and companies in both the private and public sectors. He has a Master’s in Business Administration from ESAN. He was the Director of Empresa de Administracion de la Infraestructura (ADINELSA), and a consultant in the area of supply chain management, negotiations, and contracts and research, while he specialized in the evaluation and restructuring of companies. He has an MBA and has been a Professor at ESAN University since 2004 as well as professor of at Pontificia Universidad Católica since 2008 in operations, logistics, and research.

Having recently assumed your position, what do you see as the main challenges confronting Petroperu today?

I officially took over as Chairman of the Board on March 30th, 2015 and a month later I also became the company's General Manager. This was a decision made by the shareholders to expedite the implementation and effectiveness of strategies, decisions, and actions within the company. Nowadays, the organization faces three main challenges. First is to efficiently bring forward the Talara Refinery project within the stipulated time frame. This project has an investment of $3.5 billion and should be finished in June 2019. One of its main challenges is the economic reality of the town in which this large project is located. We also aim to consolidate Petroperu's economic and operative activities; in fact, we hold the concession for Lot 64, and we are looking at the possibilities of entering to lot 192, which is already in operation and will allow us to double current volumes (10,000/bpd). We also aim to modernize our corporate structure, as Petroperu needs an institutional boost to improve profitability. We are currently in the process of developing the modernization plan for the government's approval and its implementation by the end of this year.

Some analysts have predicted that the current trend of low oil prices will continue for the next few years. In this context, does the large investment required to replace the Talara refinery make sense for Petroperu?

The oil industry is an economic sector that requires a long-term vision and an efficient operation, taking into account the volumes we move. We expect oil prices to rise in the near future; however, our objective is to have a modern refinery that will work with oil that has high viscosity levels, which are the most common ones in the Amazonian area of Peru. Petroperu produces fuels with high sulfur levels; therefore, the modernization of the Talara refinery is something required by law. In conclusion, we need this type of project to be more efficient from the operative and environmental points of view.

Why did Petroperu decide not to participate in the tender of Lots III and IV?

The main reason was that the documentation did not comply with the requirements of the previous directory of the company. They foresaw the participation in operations of these two lots as long as we reached an agreement with the operating company of each lot and the analyses of contingent liabilities. These were not ready within the time frame initially expected, despite organizing several emergency directories—regardless of the additional information provided by the other parties—we decidednot to take part in these projects. From a business point of view, we did not have all the analyses and information we required to make a positive decision. We prioritize things well and such decisions must comply with the company's standards. We are extremely rigorous in this context; therefore, we always require analyses of contingencies, socio-environmental issues, and market research, among other stipulations. The list of requirements is strict; however, it is an assurance for us for doing things well.

What role does a public company like Petroperu play in the oil sector of the country?

A company is always a company, regardless of it being public or private. The main difference has to do with who the owner is. All companies have the same goals: to achieve their own objectives and to be profitable. Our vision and objectives for the company are very clear. In spite of the fact that Petroperu is currently a consolidated and reputable brand in the country, our goal is to make it a beloved brand. At the same time, we want to expand our international horizons.

Why has the decision to take the company public on the Lima Stock Exchange been postponed?

Peru's Law 30130 points out that Petroperu can sell up to 49% of its shares; hence, the state will always remain the main shareholder. This is a way to obtain capital to finance projects and sustain growth, and has to be done when a company is most attractive to investors. Therefore, when the company achieves solidness and requires money for a key project, the directive body of the same will make the decision to sell the shares.

How does development of Peru's gas resources fit into Petroperu's strategic plans for the upcoming years?

This is not one of our top priorities because the company is not yet ready to take this step. There are other projects that are more important for the future development of the company such as the refinery.

How do you see the company in five to ten years?

We should achieve higher levels of integration at all levels. This refinery will also enable us to diversify our activities and products, enabling the company to provide finished goods to the retail market. We need to create more synergy within all departments of the company, to become more efficient. Finally, we will increase our international presence.