Peugeot Repair Questions? Ask a Mechanic for Answers ASAP
It sounds a bit like the Turbo has let go! Is it a diesel engine?
If so undo the intake pipe from the Turbo and you should be able to put your fingers in there and check for play in the end of the Turbine Shaft. If there is play which I suspect there will be then you will need a new Turbo Assembley.
When fitting a new Turbo you will also need to remove the sump to clean the Gauze filter on the pickup and also the Vacuum Pump to clean the Gauze filter in the back of the pump.
Have you got a registration number so I can see what engine it is.
Is the vehicle also using any coolant?
It could potentially have a headgasket failure. This can cause oil burning. Remove the spark plaugs and see if any of those are oil fouled and it will give you a clearer idea.
On a Peugeot the Coolant should be a Blue / Green Colour.
These are 3 cylinder engines. Some versions also had a turbo fitted but I don't think your one will have.