Camisea Pipeline Project To Lose Support

In recent days, there have been several questions if the planned Camisea project in Peru is environmentally viable and should be supported by international government organizations.

The Camisea Project is an important part of Peru?s energy policy. It involves the exploitation and transportation of natural gas as well as liquefied natural gas (LNG) from the Camisea fields to the Peruvian cost and further to international markets. Camisea possess expected reserves of 8.7 trillion cubic feet of gas and 411 million barrels of associated natural gas liquids. This amount is ten times bigger than the second largest reserve in the country. The project also involves the construction of two pipelines, one for natural gas and one for LNG. The produced gas is designed for both, domestic use and exports.

Already in May 1999, a tender was organized to award the licenses for exploration as well as concessions for gas transportation and distribution. In February 2000, upstream licenses were awarded. The most important companies involved in the project are Pluspetrol from Peru, Hunt Oil Company from the US, the South Korean SK Corporation, Tractebel, as well as the Italian Techint Group. The pipeline is scheduled to be completed by August 2004.

The Camisea project should provide Peru with a cheaper source of energy, which in turn should help increasing the competitiveness of the country?s industry. The gas would aid Peru with reducing its current deficit. Instead of importing diesel, natural gas could be exported. Moreover, foreign direct investment into Peru would rise and the petroleum sector could be further developed. During the project, an average of 1?700 jobs will be created. The export of LNG would also be the beginning of increased trade relations with import neighbours like Mexico and above all the United States of America. Last but not least, the regional and central government would receive substantial revenues in taxes and royalties.

However, the project has met strong resistance from environmental groups. They point out that Camisea lies in one of the world?s most biologically diverse region and that the venture would have significant social and environmental drawbacks. Food resources and water supplies for as many as 15?000 people could be negatively affected. Diseases could be spread or archeological sites be damaged. The total emissions of Camisea over its lifetime are estimated to reach 133.2 million tons. This is more than the total emission output of all South American and African countries (excluding Argentina, Brazil and South America) in the year 2000 together.

The involved companies, as well as the Peruvian government have sought financial assistance from multilateral lenders for the $2.6 billion project. Several institutions are currently considering providing $300 million. However, there have been increasing concerns about the environmental impact of the project and the Inter-American Development Bank delayed last Wednesday a decision whether to contribute to the project. The involvement of the bank is important because it would give the project an environmental approval and pave the way for further credits.

This must especially be a disappointment for Texas-based Hunter Oil which has close ties to US President Bush. Chief executive Ray Hunt contributed to Bush?s election campaign and also sits on the Board of Halliburton. The fact that the approval is delayed by a week implies that the bank will ask for major modifications in the project in order to meet request of human rights and environmental groups.



Author: Andreas Wild