Camisea Cash Storm | Amazon Watch
Amazon Watch

Camisea Cash Storm

July 21, 2006 | Upstream

US President George W. Bush’s administration has not decided whether or not it will back a $400 million multilateral loan for a liquefied natural gas project fed by Peru’s Camisea gas, citing the need for tougher environmental safety measures, among other reasons.

US approval for the financing is crucial, since Washington is the biggest shareholder in the world’s top three multilateral lenders.

US Treasury Assistant Secretary Clay Lowery told the Senate Foreign Relations Committee last week that Washington does not see Camisea as a “success” and expressed concerns about the new project.

The US is still studying its position on the project, a Treasury spokeswoman said.

An LNG consortium led by US player Hunt Oil wants to build a plant to export gas from Peru to markets in North America, namely Mexico, beginning in 2010.

The 4.2 million tonnes-per-year capacity liquefaction plant will be built at Pampa Melchorita, with Repsol YPF and South Korea’s SK Corporation holding the remaining balance in the Lima-based Peru LNG project.

Dallas-based Hunt Oil did not comment on the Treasury’s stance.

However, concerns continue to unfold about the original 560-kilometre pipeline that also includes some associates in the new LNG venture, such as Hunt Oil.

Transportadora del Gas del Peru’s pipeline has suffered five leaks since 2004 and the original Camisea project has failed to live up to initial expectations, said one former Peruvian official.

“One out of four people in Peru (are) not getting electricity and the promise of Camisea to deliver services to the poor has not been met,” said former Peruvian energy minister Carlos Herrera. He also said he was concerned that an LNG project would soak up the gas Peru needs to meet
future demand.

He added that many foreign companies active in the country’s upstream sector are focusing on more potentially lucrative oil projects, rather than gas for domestic demand, and a gas export project needs to be based on proven reserves.

“If domestic demand increases, the country’s gas reserves run the risk of declining at an accelerated rate. That is dangerous,” said Herrera.

Detractors have also hit out at what they called missteps by
multilateral lenders such as the Inter-American Development Bank in funding Camisea.

“Throwing money at the project just to get it going forward will not solve any problems,” said Maria Ramos of the Amazon Watch environmental group

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