PERU: Gas Exports Will Cause Local Shortages, Governors Protest

• by Ángel Páez (lima)
• Friday, May 14, 2010
• Inter Press Service

The governors want Peruvian President Alan García to modify the contract signed in 2006 during the administration of former president Alejandro Toledo (2001-2006) to export four trillion cubic feet of gas.

The gas export contracts were signed at a time when domestic demand for gas was minimal. Since then, demand in Peru has risen sharply.

President García says it is not necessary to change the contract with Consorcia Camisea -- made up of the Argentine company Pluspetrol, Spain's Repsol YPF, South Korea's SK Energy, Algeria's Sonatrach, the U.S. Hunt oil and Argentina's Tecpetrol.

He says enough gas is available in blocks 56, 57, 58 and 88, in the Amazon jungle area where Camisea operates in the Cuzco region, for both domestic supplies and exports.

However, the president did not present any technical findings to support that assertion.

Prime Minister Javier Velásquez said he would present a study on Monday May 17 certifying the true dimensions of the gas reserves, which he said would demonstrate adequate supplies.

The governors' complaints began when difficulties arose with gas supplies to power companies in the south of the country, which threaten to harm production there and the local economy.

Consorcio Camisea is already committed to selling 8.7 trillion cubic feet of gas, of which four trillion are to be exported by Peru LNG, a consortium of the U.S. Hunt Oil Company, SK Energy, Repsol YPF and Japan's Marubeni.

But southern Peru needs five trillion cubic feet of gas, an amount that is not guaranteed, said Tacna governor Hugo Ordóñez, who is the head of the National Association of Regional Governments.

'The four trillion cubic feet that Peru LNG is planning to export to Mexico should remain in the country to supply the internal market, because the law establishes that as the priority,' Ordóñez told IPS. 'Now the government is telling us not to worry, that there is more gas and supplies will not fall short. But they are talking about the future, when we need the gas today.'

In an attempt at conciliation, Velásquez said at an emergency meeting Wednesday May 12 with the five governors that construction of the southern gas pipeline would begin in January 2011. The contractor is Consorcio Kuntur, led by Brazil's Odebrecht which will receive investment from Brazilian state oil giant Petrobras, itself the owner of block 58 in Camisea.

'Doubts about shortages of gas supply in the south have been completely resolved. The reserves for the southern gas pipeline are guaranteed,' the prime minister told the governors.

But after the meeting, Ordóñez expressed his misgivings to IPS: 'We wanted the south to be supplied from the eight billion cubic feet of proven reserves, and not from potential future reserves that are not guaranteed. The gas pipeline will not be finished until at least 2014. In the meantime, not a single molecule of Peruvian gas should go abroad.'

Ordóñez argues that the only possible solution is to modify the contract with Consorcio Camisea so that all the proven gas reserves in block 88 are retained for the Peruvian market.

But the government, through Economy Minister Mercedes Araoz, ruled out introducing any modification at all in the contract on the argument that 'it would send the wrong message to foreign investors.'

However, governing party lawmaker José Carrasco, a former energy minister and former chairman of the parliamentary Commission on Energy and Mines, said Peruvian law is clear about fuel shortage situations, and that all the gas in block 88 should remain in Peru.

'Block 88 is entirely for this country, and there is no reason why a single molecule should be exported,' Carrasco told IPS. 'Regarding the contract, I am in favour of changing the price that was fixed, because it does not suit us. Instead of exporting it for a song, we may as well keep the gas and renegotiate a better price for the good of Peru.'

In the view of Humberto Campodónico, an expert on oil and gas and a researcher at the Universidad Nacional de San Marcos, the government should step in because there is a conflict of interests between Consorcio Camisea, which extracts the gas, and Peru LNG which exports it.

'The majority partners in Consorcio Camisea, which extracts and sells the gas, are also majority owners of Peru LNG, which buys gas from Consorcio Camisea and exports it,' said Campodónico.

'There is a clear conflict of interests here, as the Peru LNG partners definitely want the exports to go ahead. The minority partners of Consorcio Camisea may not agree with exporting it, but they are the minority.'

Ordóñez said that if the government did not come up with a solution for gas supplies, the population of the southern regions could rise up in protest. 'If Lima prefers foreign interests to the national good, we will not remain silent,' he said.

© Inter Press Service (2010) — All Rights ReservedOriginal source: Inter Press Service

Where next?

Advertisement