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Peru’s Energy and Mines Ministry announced on June 18 the implementation of a new plan under a memorandum of understanding to foster cooperation and energy integration with Colombia. As Peru has the only LNG export terminal on the continent and with Colombia looking to become a natural gas titan, developing new gas opportunities together is in the interest of both countries.

By no means is Peru South America’s Qatar, but the South American country has the potential to become a natural gas development hub despite Argentina’s Vaca Muerta hype. The Andean nation ranks second on the continent in terms of proved natural gas reserves with 14.1 Tcf, placing it behind Venezuela, according to BP’s latest Statistical Review of World Energy. Once contingent and prospective resources are factored in, Peru has about 90 Tcf up for grabs.

Though the country boasts a significant reserve advantage compared to its regional counterparts, it only produced 494 Bcf in 2016. The amount placed it in sixth place behind Venezuela, Trinidad and Tobago, Argentina, Brazil and Bolivia. Increased production is expected once new gas prospects are delineated.

Historically, natural gas production was practically negligible until the Camisea Field finally took off in the southern rainforest region in the late 2000s. Originally discovered in 1986 by Royal Dutch Shell (NYSE: RDS.A) and ExxonMobil Corp. (NYSE: XOM), the giant’s 2P reserves now hover at about 13.5 Tcf. Camisea’s lots 56 and 88 led by Pluspetrol are the country’s top gas producers. Adjacent to Peru’s gas giant is Lot 57, a Repsol-China National Petroleum Corp. (CNPC) venture that yields 4 Mcf per month. However, Lot 88 is the crown jewel with a monthly output of 17.5 Mcf as of June 2017.

Output projections for these blocks during the coming three years are positive and place Lot 88 at the forefront; its average production is expected to climb to 930,916 cf/d by 2021 from its current 538,814 cf/d.

And with at least 3.9 Tcf of confirmed 2P reserves, Lot 58 operated by CNPC started its extraction phase on Feb. 15, according to Perupetro, the country’s license manager.

Though these are huge developments, reserves in the vicinity of Camisea are only a small fraction of the country’s proven 14.1 Tcf.

Apart from Camisea’s eastward expansion plans, the up-and-coming playground for new gas developments extends farther east and into the southern rainforest, mostly throughout the Madre de Dios region where gas reservoirs have been confirmed. According to Perupetro, new seismic collection is almost halfway done and the Subandean Project regional modeling for Madre de Dios is 99% complete.

Another prospect in the vicinity is Lot 108, which is located west of Camisea across a national protected area. The 12,416-sq-km (4,794-sq-mile) block, also operated by Pluspetrol (65%), has confirmed natural gas potential, namely in its southern portion. In February 2015, native protesters halted an exploration campaign in the northern section of Lot 108, demanding a greater say rather than oppose its development. No new exploration plans have been announced yet.

Peru only consumed just over half of its annual output, or 278 Bcf, with the rest marketable for LNG shipments. Diversifying exports is also a top goal in President Pedro Pablo Kuczynski administration’s agenda, including to gas-starved Chile.

Currently, the Transportadora de Gas del Perú (TgP) pipeline—with a 920 Mcf capacity—routes Camisea’s produced gas to Peru’s LNG export terminal, where a total 194 Bcf were shipped worldwide in 2016, mostly to Mexico and Spain. The Southern Peru Gas pipeline, a second export line initially slated for completion in 2018, was halted due to corruption allegations as local investigations tainted the scandal-ridden Odebrecht. A tender is expected soon to resume construction.

Peru’s exploratory potential was largely underestimated until now even though it was the first Latin American nation to strike oil in 1863. Increased exploration and drilling activity to tap vast natural gas reserves could lead it to again become a hallmark investment destination for mid-sized operators and oil majors alike.

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