Algeria eyes Peruvian natural gas development

Algeria's Sonatrach, eyeing the pending development of Peru's gas reserves and transport system, said it will join state-owned Petroperu in hydrocarbon exploration and production activities.

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Feb. 5 -- Algeria's state-owned Sonatrach, eyeing the pending development of Peru's natural gas reserves and transport system, said it will join state-owned oil company Petroperu in hydrocarbon exploration and production activities.

Algerian Energy Minister Chakib Khelil, on a state visit to the South American nation, said his country will discuss the type of alliance that can be formed with Petroperu, pending resolution of several issues, which he did not specify.

For its part, the Algerian government said: "An Algerian-Peruvian work team operating in the hydrocarbon field has been installed during the visit of Energy and Mining Minister Chakib Khelil to Peru, from Feb. 1-4."

It said the team will implement the minutes signed during the visit that call for the "strengthening of cooperation between the two countries in hydrocarbon exports and production, marketing, transport of gas, refining, petrochemicals, and the training of Peruvian executives in Algeria."

Peru asked for help
The Algerian government statement, along with Khelil's remarks, followed an earlier request by Peruvian energy and mines minister Pedrao Sanchez for more assistance from the North African country, especially in the transport of offshore hydrocarbons.

Sanchez said Peru, through technology transfer, also wants to benefit from Sonatrach's experience in the development and operation of petrochemical and LNG plants.

Sonatrach already is a 21% shareholder of the Peruvian firm Transportadora de Gas del Peru (TGP), which transports gas and liquids from Camisea gas fields to Peru's Pacific coast, as well as a 10% share in the Consorcio Camisea which operates Camisea fields.

The announcement of cooperation with Algeria follows reports in December that TGP, which operates twin gas pipelines from Camisea fields, was in talks with the government to more than double the existing pipeline capacity in wake of burgeoning demand.

Loans agreed and sought
Two major upgrades—both due for completion in second-half 2009—are already under way: a $130 million increase of capacity at a compressor station in the Ayacucho region and the $150 million construction of a loop along Peru's coast.

The Andean Development Corp, Peru's Banco de Credito, and French bank Natixis in December granted TGP a $150 million loan for the expansion project, which will increase capacity to 450 MMcfd from 314 MMcfd.

But the additional capacity, originally forecast to be reached by 2015, is already considered insufficient, given demand growth. Consequently, the government and TGP are considering plans to increase capacity to 1 bcfd with a new pipeline.

While such a pipeline expansion would help in meeting demand growth, the project still must be studied and financed before it can proceed. TGP Gen. Mgr. Ricardo Ferreiro last month said financing for the project would be sought this year.

Meanwhile, Sonatrach has expressed further interest in Peru's gas industry.

In November, Sonatrach Pres. Mohamed Meziane told Peru's El Comercio newspaper that his firm was seeking out Peruvian projects in which it could serve as operator.

In particular, Sonatrach wants to explore for gas and to build local gas pipelines, according to Meziane, who also expressed hope that exploration of areas near Camisea would prove fruitful and permit gas exports, especially to Mexico and the US.

Contact Eric Watkins at hippalus@yahoo.com.

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