Camisea natural gas development drilling under way

By an OGJ correspondent

LIMA, July 16 -- Drilling has started on the first of four development wells planned for the Camisea natural gas project. The timetable is to drill four wells to depths of more than 2,000 m in the San Martin I structure on Block 88 by 2003.

Energy and Mines Minister Jaime Quijandria earlier this month visited the project in a jungle region 500 km east of Lima. So far, companies involved in the overall project consortium have invested $250 million, he said.

The total project cost of the upstream and midstream portions is estimated at $1.3 billion. This includes the natural gas field development, a natural gas pipeline and a liquids pipeline, and a natural gas distribution network in Lima and Callao.

Quijandria said he does not want to be overly optimistic and say that the project had reached a point of no return, but he believes that it is very close to that point.

He also said that 80 km of welded pipe had been laid on the route for the pipeline from Pisco on the south coast towards Ayacucho in the southern Andes.

Development plans
The contractor drilling the development wells is Parker Drilling Co., Houston, which earlier this month finished a workover of wells drilled in 1997 by a partnership between Shell Prospecting & Development (Peru) BV and Mobil Exploration & Producing Peru Inc. (OGJ, Nov. 18, 1996, p. 16).

A unit of Argentina's Pluspetrol SA, the operator of the Camisea fields' consortium, said the four wells from San Martin I would produce enough gas to supply Lima, as initial demand is expected to be low, so part of the gas will be reinjected.

Pluspetrol subsequently expects to drill in the San Martin III structure, but this will depend on level of future demand.

LNG project
Meanwhile, Hunt Oil Co., Dallas, a partner in the Camisea consortium, is working on a feasibility study for the construction of an LNG or gas-to-liquids export project facility. If an export project were to be authorized, the total cost of the upstream, midstream, and export portions of the Camisea project, including transportation vessels, would increase to an estimated $2.5 billion.

The goal is to construct an LNG or GTL plant linked to the Camisea project. Hunt is considering the selection of LNG or GTL technology for exporting natural gas or gas-derived liquid products when the project comes on stream by August 2004 (OGJ Online, Feb. 6, 2002).

Carlos del Solar, general manager of Hunt Oil in Peru, said that the company is talking to at least five potential LNG or GTL buyers now that the project is on schedule for the gas to arrive in Lima in 2004.

Block 56 on hold
In a related development, a proposal to auction Block 56, adjacent to the Camisea natural gas fields, remains on hold while the Camisea consortium decides whether to begin negotiations with Perupetro SA, the state oil agency.

Quijandria said that formal talks depend on a written proposal from the consortium. He believes Block 88 contains more than sufficient reserves, and that Block 56 should be viewed more in the context of gas-derived exports to the US.

Perupetro has said it would auction concessions to four companies for Blocks 56, 57, and 58, all adjacent to the Camisea fields. The four companies—TotalFinaElf SA, Repsol-YPF SA, Occidental Petroleum Corp., and Hunt—declared their interest in the blocks last year (OGJ Online, Nov. 9, 2001). Hunt represents the Camisea consortium in that prospective bidding process

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