Petroperu Still Eyeing Upstream Oil Options

Peru's state-run energy firm Petroperu said on Friday its decision to cancel plans to take a stake in two oil blocks did not signal the end of ambitions to return to upstream operations.

The company reversed a February commitment to take a 25 percent stake in blocks 3 and 4 on Thursday, a move seen by industry insiders as a shift in President Ollanta Humala's ambitions for Petroperu to take part in oil production for the first time in more than two decades.

"Go upstream? Absolutely," a statement posted on the company's website quoted its president, German Velasquez, as saying.

"Any company wants to control its raw material, in whatever industry, but especially in this business when that is where the real margins are."

The statement cited Velasquez as saying the company could not afford the investments stipulated to develop the blocks with conglomerate Grana y Montero and that the project had not made commercial sense.

Petroperu's unionized workers say the deal fell apart because the company came under pressure from the government to pull out.

Industry analysts say Humala's energy strategy has been tainted by erratic policymaking during his less-than four years in power. In that time, he has named four Petroperu presidents, including Valesquez who was appointed last week.

(Reporting by Marco Aquino; Writing by Richard Lough; Editing by Lisa Shumaker)