Hunt Oil: Camisea area reserves can also support LNG export project, but timing critical
Peru's greater Camisea fields area has sufficient natural gas reserves to support a $1 billion project to export LNG to the western coasts of North America, according to an official with the Peruvian unit of Hunt Oil Co., Dallas.
LIMA, Nov. 8 -- Peru's greater Camisea fields area has sufficient natural gas reserves to support a $1 billion project to export LNG to the western coasts of North America, according to an official with the Peruvian unit of Hunt Oil Co., Dallas.
An additional investment of $1 billion would be needed for an expansion of Camisea field development and pipeline infrastructure to support a coastal Peruvian LNG export project, Stephen Suellentrop, vice-president, Peru Hunt Oil Development Co., Dallas, told delegates at the fourth Ingepet conference in Lima Friday. The conference, held every 3 years in Peru, focuses on exploration and exploitation of oil and gas with a primarily Peruvian tilt.
He unveiled the results of an LNG project prefeasibility study by a consortium that Hunt is leading; the Dallas independent also holds interests in the discoveries in the greater Camisea area.
However, timing is critical in an increasingly competitive LNG project window, said Suellentrop, who warned against tying the Peruvian LNG export project to additional reserves available in Bolivia, as some have suggested: "The project has to start when the markets become available."
Camisea fields San Martin and Cashiari are already being developed to support a pipeline from Peru's southern jungle to Lima, essentially creating a natural gas infrastructure and market for the country (OGJ Online, Nov. 6, 2002).
Suellentrop said that the greater Camisea area holds 19.6 tcf of gas in known structures and identified extensions of existing structures without the need for additional exploration.
Looking at the greater Lima area market, gas demand forecasts range from a pessimistic 1 tcf over the next 20 years to 2-3 tcf over the same time span. However, an International Development Bank study supports the more optimistic forecast, the Hunt official said.
Suellentrop expressed confidence that the Camisea reservoirs would perform well enough to support the production levels required by both the LNG and pipeline projects.
Accounting for the level of demand projected for the existing Camisea megaproject, a projected reserves base of 4.2 tcf needed to support a single-train, 4 million tonne/year LNG export project would leave at least 6 tcf of gas still available in the greater Camisea area for possible future expansions, he added.
Noting that gas demand in the US is projected under some scenarios to reach 30 tcf by 2015, that leaves potential shortfalls of 5 bcfd of market availability in the US alone, Suellentrop said. In addition, Mexico's booming gas demand—at growth rates of 8.1%/year—yields a potential shortfall of 800 MMcfd-1 bcfd of gas demand in that country by 2010.
Suellentrop said that Hunt is in "serious discussions with potential purchasers" of Peruvian LNG and that the consortium has "substantially advanced the design of liquefaction facilities" along Peru's Pacific coast.
The group has screened several potential sites for the plant as having met design parameters, including the need for a breakwater whose design is expected to be completed by yearend.
The plant would be based on Air Products Corp.'s liquefaction process, which the Hunt official noted is used in 90% of the world's LNG facilities. Special attention is being paid to the storage tank design—which would entail two 110,000 cu m single-containment tanks—because of the intense seismic activity in the region.
The single-train LNG plant would have an initial inlet design capacity of 620 MMcfd, but a more likely output level would be 4.5 million tonnes/year, which would ratchet up the inlet design capacity to 670-700 MMcfd, "along the lines of the largest LNG trains in the world." It would also employ two General Electric Frame 7 compressors.
The Hunt group would buy the gas, a mix of methane and 8% ethane, from the upstream developers without the need for scrubbers or liquids recovery, which would be accommodated via gas processing facilities upstream at Las Malvinas. Suellentrop estimated the carbon dioxide content of the gas stream at 57 ppm, which would be taken care of via the BASF AG dehydration process.
The Hunt official stressed the importance of timing the Peruvian project to take advantage of a narrow market window at a time when competing LNG projects—expansions and grassroots efforts—are proliferating in areas such as Australia, Indonesia, and Russia.
Suellentrop told OGJ that the Peruvian LNG export project would target a start-up by yearend 2006 or early 2007, with regasification facilities likely to be sited at Baja California or another site along Mexico's western coast. "The regasification folks tell us that they could start up in 2005, but nothing is being built yet," he added.
He didn't disclose the projected landed cost of the Peruvian LNG in Mexico or California but said that it would be able to compete on a netback basis, accounting for the transportation differential, with Henry Hub gas.
In response to queries from the Ingepet audience about the potential for a Peruvian LNG export project incorporating Bolivian gas as well, Suellentrop said, "It is not in Peru's best interest to move the project south." Rather, "The Bolivians should follow our project. We have economies of scale and shipping advantages that the Bolivians must envy."
Incorporating Bolivian gas would entail not only incurring additional costs of moving the project farther south along Peru's coast, moving it farther from market, but "the Bolivians would have to place twice as much gas to justify the added infrastructure."
Suellentrop suggested that tacking on the 8 million tonnes/year that incorporating a Bolivian scheme would entail would overwhelm the available market. He likened Peru's LNG export initiative to the successful model established by Trinidad and Tobago, whose Atlantic LNG export project is being developed on a phased, single-train module basis.
He ticked off the benefits to Peru from the project of increased employment (3,000 during construction, 400 permanent during operations), improvements to local infrastructure, an acceleration of royalties and taxes estimated at $200 million/year, and—most appealing to the Ingepet audience—the country achieving the status of being a net exporter of hydrocarbons.
Contact Bob Williams at firstname.lastname@example.org.