The Government of Peru has sanctioned a financing package worth $1.75bn (6.59bn new sol) to assist the state oil company, Petroperu, reported Reuters.   

This move is aimed at addressing Petroperu's escalating debt and diminishing cash reserves.  

It follows Prime Minister Gustavo Adrianzen's call for “drastic measures” to support the struggling oil company. 

In response to financial challenges, Petroperu's board of directors tendered their resignation.  

The former board cited the company's “financial unsustainability” and the government's inadequate response to their concerns, which they had highlighted since assuming leadership roles.  

In a statement, as reported by Reuters last week, the board said: "We deeply hope the future decisions will be the best ones for a country that does not want to keep seeing its scarce resources – essential to reducing enormous social divides – allocated to Petroperu without demanding a clear roadmap, accountability and successful results.” 

The government's decree, issued on 14 September, outlined the financial support measures including a short-term credit facility of up to $1bn and an additional $750m in transitional financial assistance.  

“The purpose of this emergency decree is to adopt extraordinary and urgent economic and financial measures to overcome Petroperu's financial situation,” the decree said. 

Furthermore, the decree mandated the Economy Ministry to assume responsibility for Petroperu's debt obligations related to bonds and loans for the Talara refinery modernisation, starting in the second half of 2024. 

Petroperu, as the nation's primary fuel provider, has indicated a requirement of at least $2.5bn to maintain operations.  

The financial woes of Petroperu were exacerbated following the $6.5bn upgrade of the Talara refinery, which led to the loss of its investment-grade rating in 2022.  

The project was funded through government contributions, loans and bonds.  

Despite the challenges, Petroperu has received three government disbursements including loan guarantees amounting to approximately $1.3bn in February.