Camisea Natural Gas Project

On September 10, 2003, the Inter-American Development Bank (IDB) approved a US$135 million loan towards completion of Peru’s Camisea Natural Gas project, the first major gas development initiative in the Peruvian Amazon. The project is a public-private partnership, and is being executed by a consortium of multinational companies under the supervision of the Peruvian government. The original project involves the construction of four initial drilling platforms in the Lower Urubamba Valley of the Peruvian Amazon, two pipelines for transportation of natural gas and liquid natural gas to the Peruvian coast, and a natural gas distribution network and export facility in Lima and Callao.

There are several serious social and environmental concerns stemming from the Camisea project. The project is located in one of the world’s most ecologically prized and pristine primary tropical rainforests, which happens to be home to numerous indigenous settlements, as well as to nomadic Amerindians known to be living in voluntary isolation. Exploration, extraction, and transport activities have already led to degradation and conversion of critical natural habitats and have opened the way to a potential influx of people and companies—including other extractive industries and forestry operations—that want to exploit the region’s natural resources. Furthermore, the consortium has plans to construct a liquefaction plant on the coast in the middle of an internationally renowned marine reserve (in Paracas Bay), and necessary impact studies and alternatives analyses have not been completed. Indigenous communities in the region claim that the public consultations held by the companies and the government have not been adequate and that these project promoters denied them the right to say no to the project or even to change its design. Additionally, a percentage of the profits from Camisea that were designated to mitigate impacts of the project are being used to purchase arms for the military and the national police.

Despite all the problems with the Camisea project, the consortium and the government are in the process of expanding it. They want to construct more drilling platforms in another block of the Urubamba Valley, within an indigenous reserve. There is also a proposal on the table to build a US$2.1 billion liquefaction plant on Peru’s southern coast. This second stage of Camisea, which is being managed by the Texas-based company Hunt Oil, would require a follow-up loan from the IDB (Hunt is reportedly asking for US$400 million) and the IDB’s assistance in soliciting additional commercial financing.

Despite the support that it has received from the oil and gas industry and various development banks, Camisea was controversial from its inception, and it continues to be a contentious issue between civil society and project promoters. Becoming operational in August of 2004, concrete evidence of the project’s negative toll on the environment and local communities is mounting. In early 2006, E-Tech International, an American non-profit organization specializing in environmental consulting, completed an evaluation of the Camisea project. The report, detailing the construction and operation of the pipeline, was presented to the IDB on February 27, 2006. The findings stated that within just the first 15 months of its construction, there had been four reported ruptures in the natural gas liquids pipeline, with three major spills. It asserted that the accelerated construction of the pipeline by the operating consortium, Transportadora de Gas del Peru (TGP), due in large part to pressure from the Peruvian government, likely contributed to poor construction. With that many spills in 15 months, the Camisea pipeline is a justified concern for environmentalists and local communities. However, the IDB and TGP have downplayed the severity of the situation and dismissed the E-Tech International report as lacking in technical data despite the fact that its author, Carlos Salazar Tirado, monitored the construction of the pipeline and is a certified pipeline welding inspector.

Further fueling the controversy, the Peruvian press has recently suggested that Peru’s current Prime Minister, Pedro Pablo Kuzynski, might be caught in a conflict of interest relating to Camisea. Kuzynski has served on the board of contracting giant Techint, which was responsible for design and construction of the project’s gas and natural gas liquids transportation system. Furthermore, he has been an advisor to TGP member Hunt Oil, and he was working as a consultant for the Inter-American Development Bank when it decided to finance the pipeline.

Despite all this, the project has received a prize from the magazine Project Finance and the IDB considers it to be a success.

Civil Society

Amazon Watch-Atossa Soltani, Maria Ramos
Tel: +1-310-456-9158

Sustainable Energy and Economy Network, Institute for Policy Studies-Nadia Martinez
Tel: +1-202-234-9382

Environmental Defense USA-Aaron Goldzimer
Tel: +1-202-387-3500

Racimos de Ungurahui (Peru)-Lily La Torre
Tel: (511) 224-2490

Shinai Serjali (Peru)-Gregor MacLennan
Tel: (511) 222-1692

Rainforest Action Network
Tel: 415-398-4404, Fax: 415-398-2732

Asociación Civil Labor/Amigos de la Tierra Perú, (Perú)-Patricia Patrón
Telefax: (51-1) 261-6515

Inter-American Development Bank Contacts

Robert Montgomery, Environmental and Social Specialist
Private Sector Department
1300 New York Avenue NW
Washington, DC 20577, USA
Tel: +1-(202) 623-2384
Email: robertm@iadb.org

Joseph Milewski, CESI member on Environment
1300 New York Avenue NW
Washington, DC 20577, USA
Tel: +1-(202) 623-2197
Email: josephm@iadb.org

Anne Deruyttere, Head
Indigenous Peoples Unit
1300 New York Avenue NW
Washington, DC 20577, USA
Tel: +1-(202) 623-1254
Email: anned@iadb.org

Alvaro Llosa, Division Chief
Environment and Natural Resources Management Division of Region
1300 New York Avenue NW
Washington, DC 20577, USA
Tel: +1-(202) 623-1646
Email: alvarol@iadb.org

Paola Van Houten, Environmental and Social Specialist
Private Sector Department
1300 New York Avenue NW
Washington, DC 20577, USA
Email: paolavh@iadb.org