IDB loan decision delayed on Camisea pipeline project

Aug. 18, 2003
Late last month the Inter-American Development Bank (IDB) postponed a decision to provide a $75 million loan for the pipeline portion of the Camisea natural gas megaproject in Peru's Amazon rainforest.

Late last month the Inter-American Development Bank (IDB) postponed a decision to provide a $75 million loan for the pipeline portion of the Camisea natural gas megaproject in Peru's Amazon rainforest.

The vote was officially delayed to Aug. 6, but at presstime last week there still had been no announcement of a decision.

Enrique Iglesias, IDB president, was quoted in press reports as saying that the IDB board's postponed vote was to give board members time to consult with their respective governments.

The loan is to finance the pipeline, currently under construction, which will transport gas from the Camisea fields near Cuzco over the Andes to the coast. A further $60 million credit line also depends on the IDB decision.

It is expected that once in operation, the $1.6 billion Camisea project, which is due to come on stream in August 2004, will have the potential to stimulate gas exploration in Peru, much like the increased exploration activity seen in Bolivia following the development of the Bolivia-Brazil pipeline (OGJ, Nov. 25, 2002, p. 20).

Meanwhile, Camisea project participants marked progress on a related proposed LNG project and a gas supply contract.

Project details

The Camisea natural gas project, which involves upstream and downstream portions to develop and transport to market 13 tcf of gas, stands 68% completed.

Pluspetrol Peru Corp. SA, operator of the upstream portion of the Camisea gas project on the eastern slopes of the Andes, 500 km east of Lima, announced that initial site work also has begun at Pisco on the southern coast for the construction of the project's 50,000 b/d NGL fractionation plant.

Work on the offshore installations, including construction of a subsea pipeline and cargo terminal, remain on hold for final approval of the environmental impact assessment for the offshore zone (OGJ Online, June 9, 2003).

Strong project opposition

Loans for the Camisea project are opposed mainly by nongovernmental organizations that say that the Camisea project is causing damage to the environment and harming native communities.

Members of the Camisea consortium said that if the loans continue to be delayed, they still would seek financing from their own resources as well as supplier credits.

IDB and US government officials said the US Department of the Treasury had notified IDB they were considering abstaining from the vote because of a federal law that requires environmental assessments to be completed 120 days before the US votes on a multilateral development bank loan. The US Agency for International Development (USAID) told Treasury that the Camisea project does not meet that standard, according to USAID analysts.

Worldwide environmental organizations are also lobbying to halt the project due to concern about the impact on the rainforest and protected coastal reserves, local newspapers reported.

"What happens in the Amazon rainforest keenly concerns Brazil," José Sarney Filho, a former Brazilian environment minister and president of Greenpeace in Brazil, told OGJ. "Although the forest straddles several countries, including Brazil, it is composed of one ecosystem, and any harm to the region's environment is opposed by us," he said.

Sources from the US embassy in Brazil said the administration of President George W. Bush plans to approve financial support for the project, via both the US Export Import Bank and IDB.

Peru LNG's EIA study

Dallas-based Hunt Oil Co. has a major stake in the Camisea project with partner Pluspetrol SA of Argentina. Halliburton Co.'s KBR unit is a top candidate to build a $1 billion LNG plant on the Peruvian coast if Hunt Oil moves forward on plans to export Camisea gas to the US.

On July 30, Peru LNG (formerly Camisea LNG Co.) presented its EIA to Peru's Ministry of Energy and Mines. Peru LNG, which plans to export LNG from the Camisea fields by 2007, is a joint venture of Hunt Oil and South Korea's SK Corp.

The JV plans to build installations on fallow land in a 522 ha area for LNG production between Cañete and Chincha, south of Lima and away from sensitive environmental zones.

Peru LNG estimates the cost of the basic LNG project to be about $1.1 billion for a first train plus an additional $800 million for installation of wells, pipelines, and ancillary services.

The company expects to clear the EIA with the ministry by yearend and undertake construction over 42 months prior to start of LNG exports.

Peru LNG plans to invest only in the liquefaction plant and related facilities and to seek a contractor to transport LNG to Mexico and the US West Coast.

Take-or-pay contract signed

Meanwhile, Empresa de Generación Termoelectrica Ventanilla SA (Etevensa), which is held 60% by Spain's Endesa, signed on Aug. 1 a take-or-pay gas contract with Peru's Electroperu for the delivery of 70 MMcfd of gas from the Camisea project. Etevensa won the contract earlier this year (OGJ Online, May 8, 2003). Electroperu holds 38.22% of the remaining shares in Etevensa, and Electroperu employees hold the remaining 1.8%.

Etevensa is scheduled to operate a single-cycle, gas-fired power plant by August 2004 and a combined-cycle plant starting in June 2006.

The contract was held up by a series of problems that included a court injunction against the concession for Etevensa—since solved—and back tax claims against companies held by Endesa.

Proinvestment, the government investment agency, has signed an agreement to indemnify Etevensa should the take-or-pay contract be annulled. The government also guaranteed that Proinvestment and Electroperu will meet their statements and obligations in accordance with the contracts they have signed to safeguard the operation.