OREANDA-NEWS. May 24, 2018. Peru's energy ministry revoked five shallow-water exploration contracts awarded in March to Ireland's Tullow Oil.

The ministry published a seven-point communique outlining its decision, stating that the decision to rescind the contracts was based on the need for greater public participation in the process used to award exploration blocks. The new decree cancelling the contracts gives hydrocarbons agency PeruPetro 120 days to approve new regulations for public participation.

The Irish independent called the move "deeply disappointing given that Tullow has complied with the process and procedures required under Peruvian law…Tullow has operated throughout under the strict guidance of PeruPetro," Tullow told Argus. "We will now consider our next steps."

The Peruvian Hydrocarbons Society (SHP) and National Mining, Petroleum and Energy Society (SNMPE), warned of negative consequences from the move, but maintained a sliver of hope that the decision could have long-term positive effects.

"We disagree with how this has been handled, but the government has told us that it wants to improve the citizen participation process and ensure transparency. This could be positive in the long run, but everything will depend on what the government does next," SHP president Felipe Cantuarias told Argus.

He said despite the decision, there was no reason why the state and Tullow could not work together to secure a social license for the blocks and sign new agreements.

Contracts for the blocks, located off the northern coast, have been controversial from the start. They were signed by former president Pedro Pablo Kuczynski on 21 March, the same day he resigned to avoid impeachment in a corruption case. The decrees were published three days later.

Legislators from most parties in the 130-member unicameral congress objected to the contracts, submitting different bills to have them annulled. Lawmakers complained about economic and environmental issues, claiming the contracts would have allowed Tullow to pay royalties as low as 5pc and would have harmed fishing grounds.

The regional government in Ancash state passed a resolution on 4 May rejecting contracts for two of the blocks in its coastal waters, citing the need to protect the fishing industry.

Fishermen's cooperatives along the northern coast had protested the agreements, claiming they were not properly consulted.

President Martin Vizcarra told Argus prior to the formal cancellation of the contracts that his administration decided to review the agreements to dispel any suspicions.