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.
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.”
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.
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.