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The Wall Street Journal: Hunting Resources in Peru

December 20, 2007

A Hunt Oil Co.-led gas project could start Peru’s long-overdue exploitation of its natural resources, and boost its battered economy. But environmentalists and indigenous groups have inquired: At what cost?

When oil was discovered in the northwest of Peru in the 1970s, the country expected more to be found and applied for membership in the Organization of the Petroleum Exporting Countries.

“Luckily, they said no,” said former mining minister Jaime Quijandría. “They’d have probably thrown us out by now.” Peru produces 100,000 barrels of oil a day and consumes 180,000.

A decade later, Royal Dutch Shell discovered natural gas at Camisea, a site in Peru’s Amazon. Again, much was expected. Peruvian industries could shift energy needs from imported oil to domestic gas, giving the economy a shot in the arm. But Camisea’s fate became as intricate as a soap-opera’s plot. Royal Dutch Shell abandoned the project twice, and for more than two decades, no gas was produced at the site. Camisea was nicknamed “Como sea” — whatever — in Spanish.

Finally, in 2004, a consortium of companies, including Hunt Oil Co. of Dallas, Texas, delivered Camisea’s first natural gas shipment to the capital, Lima. Since then, royalties, taxes and lower energy costs have boosted Peru’s economy by about one percentage point annually — although the gains have benefited wealthy cities rather than Peru’s impoverished countryside.

Spurred by Camisea’s success, Peru has now opened wide swaths of the Amazon rainforest for oil-and-gas exploration. With a Hunt liquefied natural gas project set to come on line in 2010, the country intends to become a big exporter of gas — and maybe even oil. Hunt is among the dozen or so companies that have won the rights to hunt for oil and gas elsewhere in Peru.

“We are back on the radar of companies who didn’t know Peru existed,” Mr. Quijandría said.

Perhaps, but Peru is also on the radar of environmental groups. Amazon Watch, Environmental Defense, and Oxfam say the new development will despoil the Amazon and harm indigenous groups. U.S. environmental groups have banded with local communities in the past to shut down mines and drilling projects they opposed. U.S.-based Amazon Watch and others have already pointed to five ruptures in one of the Camisea pipelines as evidence of worse problems to come.

The Achuar Indians’ land along the Rio Corrientes has been damaged by decades of pollution from oil drilling. Amazon Watch paid the Achuars’ expenses when the Indians successfully lobbied ConocoPhillips to halt oil exploration on Achuar land; now, the Achuar are pressing Hunt to do the same.

Petronila Chumpi, who represents Feconaco, a federation of more than 9,000 Achuar members, said the Achuar have decided to reject oil and gas projects “because of 36 years of impact we have suffered.”

“We have only one position and that’s, ‘No,'” Ms. Chumpi said.

Hunt isn’t ready to take no for an answer. The company has met once with Ms. Chumpi’s group, and said it wants to explain how newer technology can limit pollution, and how Hunt is helping other communities in Peru. The company is also studying Achuar politics, trying to figure out whether different Achuar organizations would be more amenable to Hunt’s pitch.

Juan Valdivia, Peru’s current minister of mining, lambastes Amazon Watch and Oxfam, as “anti-mining groups working against the country,” a charge the groups reject. Indeed, some in Peru’s government share the environmental groups’ concerns that the damage to the Amazon may outweigh the economic gain.

Peru doesn’t have a federal agency to oversee environmental issues, like the U.S. Environmental Protection Agency. Instead, dozens of agencies each have environmental departments, which don’t have much clout and don’t work together.

Carlos Alza Barco, chief of staff of Peru’s Public Ombudsman office, a consumer affairs agency, said the Hunt project could offer the chance to change that. “It’s time to make history,” Mr. Alza Barco said. “If we want the country to promote investment, we need to have strong public management of environmental change.”

Write to Bob Davis at [email protected] and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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