UPDATE 1-Peru may use army to end protests at energy sites

(Adds quote, context)

LIMA, Aug 18 (Reuters) - Peru's government on Monday threatened to send in the army to break up protests at energy installations that indigenous groups surrounded a week ago to denounce laws they say will strip tribes of their land.

The government issued a decree for the provinces of Cusco, Loreto and Amazonas, allowing it to order the armed forces to disperse protesters.

Talks held last week between the government and indigenous rights groups faltered. Tribes are upset with a law President Alan Garcia passed earlier this year that makes it easier for big companies to buy land owned collectively by communities.

The law was passed as part of Peru's free-trade deal with the United States, and indigenous groups fear it will be used by mining and energy companies to snap up their land.

"Indigenous people are defending themselves against government aggression," Alberto Pizango, president of AIDESEP, a rights organization, told reporters.

Police in the area said at least two of their officers did not return after being sent to a protest site over the weekend, prompting local media to say they were taken hostage. AIDESEP denied protesters had taken hostages but insisted the officers were being treated well.

Tribal groups are asking Congress to revoke the land law and Pizango said the protests would end once the government shows a willingness to renegotiate.

The protests have involved some 500 people who surrounded two energy installations: an oil pipeline in northern Peru owned by state-run company Petroperu, and a lot of Argentine company Pluspetrol that sits in the Camisea natural gas field in southern Peru.