BBC NEWS: Peru prepares for the gas age

BBC NEWS: Peru prepares for the gas age

“Shell first had the contract to develop the fields, but left the project after a row with Peru’s former president, Alberto Fujimori.”

By Hannah Hennessy

BBC reporter in Lima, Peru

Posted 10 August 04

Something good is arriving. That is the slogan marking the launch of Camisea, the most ambitious energy project in Peruvian history.

For the economy of the cash poor but resource rich South American nation, the slogan could not be more apt.

But it has been a long and contentious journey.

More than twenty years after natural gas was discovered deep in the Amazon jungle, Peru’s President Alejandro Toledo has inaugurated a $1.6bn project to pipe it across the Andes and up the Pacific coast to Lima.

One pipeline will supply the capital with gas for commercial use; a second one will carry natural gas liquids to a processing plant on the Pacific coast.

From there, Peru hopes to export lucrative markets in Mexico and the United States.

Cheaper energy

“Thanks to Camisea, Peru will go from being an energy importer to a country that exports energy overseas, a net exporter beginning in 2007,” President Toledo said during the inauguration ceremony at the Las Malvinas gas fields.

But Camisea is expected to do more than just fill Peruvian coffers with foreign cash.

The project has directly generated an estimated 14,000 new jobs and should indirectly create 55,000 more. The arrival of the gas in Lima will slash energy costs for hundreds of businesses and theoretically make Peruvian industry more competitive.

In a country where more than half the population lives below the poverty line, businesses won’t be the sole benefactors.

Within two years, Camisea’s cleaner and cheaper gas should be reaching thousands of homes in Lima, providing residents with energy at around half the current price.

Gas age

President Toledo said Camisea would add one percentage point to Peru’s GDP for the 33-year-life of the project, and for almost another thirty years after that.

He said exports would contribute another percentage point to Peru’s GDP for eighteen years.

“Good news for Peruvians – we’re entering the gas age,” Peru’s La Republica newspaper announced on its front page last week.

But not everyone agrees.

Critics say economic benefits are being put before environmental concerns.

Camisea’s gas fields were discovered by energy giant Shell in the early 1980s. In the department of Cusco, around two hundred and eighty miles from Lima, there are proven natural gas reserves of at least 8.7 trillion cubic feet.

Public confidence?

Shell first had the contract to develop the fields, but left the project after a row with Peru’s former president, Alberto Fujimori.

In December 2000, the concession was awarded to a consortium of smaller companies led by Argentina’s PlusPetrol.

That consortium took out full page adverts in some of Peru’s top newspapers.

“Forty-four months after we made our promise, now we say to Peru, we have fulfilled that promise. We’re grateful for your confidence in us,” the advert said.

The confidence hasn’t always been there.

Environmentalists said the consortium’s smaller companies were not experienced enough to handle the challenges of working in one of the most biodiverse regions in the world.

Two years later, it seemed they were proved right. The consortium was fined by Peru’s energy regulator for violations, including crossing into a protected reserve without authorization and leaving cleared debris exposed to heavy rains, causing an environmental hazard.

Environmental dimension

Since then environmentalists and indigenous groups have accused the developers of causing irreversible damage to the pristine jungle.

They allege the consortium has also damaged the lives of isolated tribes living in the region, by introducing diseases, cutting down trees and contaminating their food supplies.

President Toledo acknowledged that controversy at the inauguration.

“I want to pay homage to the native communities for taking this step with a constructive spirit that has allowed this project to become reality that does take into consideration environmental dimensions and respects the culture of the native communities,” he said.

But indigenous leaders have called on the government and the consortium to work alongside them to ensure those who live near Camisea will not be forgotten.

Indigenous leader Walter Catehuari said he would not accept “people taking advantage” of his own people.

After such a long journey, the arguments are unlikely to end with the inauguration of Camisea.

But one thing developers, environmentalists and all Peruvians seem to agree on is that there is a difficult balance to be struck between preserving the wealth of one of the most biodiverse regions in the world and securing cash for this poor country.

Story from BBC NEWS:

http://news.bbc.co.uk/go/pr/fr/-/1/hi/business/3543060.stm

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