Historic Pipeline Contract Hooks Up Peru’s Gas-Starved South

Peru’s leaders fumbled for years to share the spoils of its natural gas boom south of its capital.

That’s finally changing with the arrival of an ambitious $4 billion natural gas pipeline, running the spine of the Andes and through jungle to planned power plants on the Pacific coast.

The state’s private investment agency awarded the contract to a consortium made of Brazil’s Odebrecht and Spain’s Enagas  yesterday after throwing out a rival bid, edging forward President’s Humala ‘massification’ energy policy.

The thousand-kilometre (662-mile) Gasoducto Peruano del Sur connects Cuzco’s Camisea gas field – which produces half of Peru’s energy – and its southern regions that rely on costlier petrol and diesel.

The
The Gas Pipeline will transport gas from Cusco through Arequipa, Moquegua to Tacna on the Chilean border (source: La Republica)

It could transform the country’s energy matrix, facilitating the future consumption demanded by Peru’s mines, which contributed to it being South America’s fastest growing economy last decade, at 6.4 percent a year.

“Power companies, transport companies and all Peruvians will have access to substantially cheaper energy,” the Energy and Mines Minister, Eleodoro Mayorga told reporters yesterday.

“Camisea’s resources are finally going to arrive to southern markets, which will be a way to drive the economy.”

Natural benefits

Up to 600,000 households, many regularly at altitudes above 3,000 metres which experience freezing temperatures, would benefit “over the medium term” from the cheaper fuel, Ms Mayorga said.

Natural gas uses 60 percent less than diesel to generate a watt of electricity, according to ministry figures.

The pipeline, with a capacity for 500 million cubic feet a day will make Peru less dependent on its national grid in Chilca in the Lima region, linking it to two thermoelectric plants on the Pacific coast in Moquegua.

A Franco-Israeli consortium won the tender process last year to build the 500-megawatt plants, investing $700 million.

The project, provided by Odebrecht and Enagas at a $7.33 billion cost could spark immediate exploration in Peru’s centre and south, experts said.

“Companies don’t speed up exploration because there isn’t demand,” Alvaro Rios, a director at Gas Energy, told El Comercio newspaper.

“It’s a chicken and egg dilemma. In hydrocarbons the pipeline is always first; then the reserves begin to appear by themselves. Nobody is going to invest hundreds of millions of dollars to discover reserves and hold them for 10 years if they can’t get them out to market.

Chile opportunities 

If more gas deposits are found, the surplus gas could supply neighbouring Chile.

“Chile is eager to find a solution to its energy woes, particularly a solution that would redress the soaring costs for its mining sector in the north of the country,” said Jeremy Martin, Energy Programme director at the Institute for the Americas policy centre in California.

“There is also the possibility of liquefied natural gas from Peru to Chile – again the geographical proximity is an importance piece.”

Natural gas demand could almost double by 2024 following some estimates, though a commitment to enhanced infrastructure was vital, Mr Martin added.

Mr Mayorga, said Peru’s south could receive $12 billion investment by 2021 if certain projects coincided with the pipeline’s development.

They included construction of an oil pipeline with a fractional distillation plant on the coast, and development of its petrochemical industry.

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2 thoughts on “Historic Pipeline Contract Hooks Up Peru’s Gas-Starved South

  1. This is a really ugly piece of journalism. The collocation of ‘gas’ and ‘starved’ is a particularly worrying sign of the bias coursing through this article. The implication being, whether intended or not, that a lack of natural gas should spark images of poverty, hunger, underdevelopment, distress, people in need. These direct links you make between gas exploration and development are deeply misguided.

    When I first read this article I said to myself: Wow! A natural gas line running through Andean and Amazonian territory that didn’t cause an upset for the people actually living there! I sure hope Mr. Pashley isn’t leaving anything out here..

    But wait! I did a ten second google search and found that people from all over Peru had been protesting the pipeline for a year! Including the people that your article says it will benefit! I really hope this is just sloppy journalism. Even if that’s that case, you should be damned well aware of how harmful this kind of writing really is once it makes it’s way towards a more public audience. Misrepresenting the issues by excluding the opinions of those who are directly affected by gas exploration missions is inexcusable. The neocolonial privatization of lands previously held by indigenous peoples is a massive issue across South America, and deliberately editing out this fact in articles such as these can only be described as Orwellian.

    Your opinions on development and wealth wreak of European ethnocentrism and I can assure you that, from the borders of Mexico down to Tierra del Fuego, they are not wanted on this continent.

    1. Thank you Paz for your comment and interest in my site.

      The headline isn’t intended to draw images of poverty and distress, as you maintain, but draw attention to the fact that most Peruvian regions outside of Lima, and particularly its south, have little access to natural gas. They rely on costlier diesel to heat their homes and cook, which is less energy efficient according to ministry figures backed by energy experts, and will be eventual recipients of cheaper fuel. The investment in the region and development of a viable petrochemical industry are also noteworthy.

      In this sense the announcement of the pipeline is historic and will relieve the scarcity of natural gas in these regions. It has been met positive in the main by politicians and the national press, and from that perspective I communicated the story.

      In my reading and interviewing for the story, particular indigenous groups as you contest weren’t highlighted as being at risk.

      Take a look at the reporting by all major Peruvian news outlets and point out me to where the fears you write are mentioned.
      I’ll put a few links for you. I expect you speak Spanish, given your encyclopaedic knowledge of the continent.

      Whatever the ulterior motives of the four media sources I provide you may surmise, a lack of mention of the fears you express is telling, given many have championed indigenous causes previously.

      1. http://www.larepublica.pe/01-07-2014/proinversion-entrega-buena-pro-para-la-construccion-del-gasoducto-sur-peruano

      2. http://elcomercio.pe/economia/peru/asi-recorrido-gasoducto-sur-peruano-noticia-1739597

      3. http://publimetro.pe/actualidad/noticia-que-beneficios-trae-gasoducto-sur-peruano-24480

      4. http://www.bloomberg.com/news/2014-06-30/odebrecht-enagas-win-peru-duct-bid-as-gdf-s-group-barred.html

      In any case, if you remain unsatisfied, I look forward to seeing your writings on their respective letters pages in the same accusatory manner as you have written here in any case.

      To counter your claim that my writings “wreak of European ethnocentrism” and I should be assured that, “from the borders of Mexico down to Tierra del Fuego, they are not wanted on this continent”, read two articles of mine recently published that communicate the indigenous perspective in separate stories.

      The first concerns the ‘Baguazo’ court proceedings written in May, of which I expect you’re aware: https://alexpashley.com/2014/05/26/arrival-of-interpreters-set-to-ease-amazon-natives-baguazo-testimony/.

      Secondly, is a piece on the packet of economic measures passed by the Peruvian government in June: https://alexpashley.com/2014/06/27/investment-over-environment-as-humala-reforms-rip-up-red-tape/

      In my viewing, it tells both sides and reports that environmental rules and protected zones, in which many indigenous groups live, are being relaxed in favour of pro-business policies by the Humala administration.

      I hope they go some way to diminishing your suspicions my intention is to misrepresent, omit facts, and peddle Orwellian (that old chestnut that gets deployed far too often these days) journalism.

      And finally, I’d be interested to hear your own affiliations when you write your next bit of vitriol, rather than writing under a pseudonym,

      Regards,
      AP

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