The lone oil-producing nation in Central America confronts an uncertain future: impending industry collapse?
Guatemala is the only oil producer in Central America, but the future of its main oil field, Campo Xan, is uncertain. With the extraction contract about to expire, the country’s oil industry could face major challenges. Since the 1930s, Guatemala has been exploring and producing oil, mainly in the Petén department. Despite not having a large amount of reserves, the oil industry has contributed over US$809 million to the State, mainly from Campo Xan. This field, located in San Andrés, Petén, has been operated by the Franco-British company Perenco since 2001 and is responsible for 91% of the oil-derived revenues. However, oil production in Guatemala is facing challenges, with the main one being the imminent expiration of the country’s largest extraction contract, Contract 2-85, which expires in August 2025. This contract, covering operations in Campo Xan, has been the backbone of the industry for decades.
The future of the industry is at stake
The extension of the contract with Perenco depends on the approval of a reform to the Hydrocarbons Law (Decree 109-83), proposed in 2022, but the issue has not been discussed in Congress. If the contract is not extended, Perenco could cease its operations in Campo Xan, which could trigger a crisis in Guatemala. The president of the Guatemalan Association of Hydrocarbon Producing Companies, Fredy Gudiel, has warned that Perenco’s departure would be devastating for the sector. Additionally, mayors and other political actors have called for the contract extension, pointing out the economic benefits it generates, such as contributions to the Fonpetrol.
Economic impact and projections
The Ministry of Energy and Mines (MEM) estimated in 2021 that if Contract 2-85 remains in force until 2045, the State could receive up to US$165.3 million, including US$38.6 million in royalties. However, the current government’s position is not to extend the contract. Despite this uncertain outlook, Perenco still operates a refinery and the Hydrocarbons Transportation Stationary System (SETH), which transports the crude oil to the Piedras Negras terminal. This project has a validity of 25 years, with its last permit granted in 2019.
The future of the oil industry in Guatemala
The main obstacle to the continuity of oil extraction in Guatemala is the legislation on protected areas, which came into effect after the start of operations of Contract 2-85. Campo Xan is located within the Laguna del Tigre National Park, which has generated controversy and complications for the contract renewal. If Guatemala’s oil industry collapses, the country would lose an important source of income and employment, directly affecting the communities that depend on the benefits generated by Perenco’s operations. The situation is still developing, and the extension of Perenco’s contract will be crucial in determining the future of the oil industry in Guatemala.
