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The Camisea gas project has completely revamped Peru's energy matrix, provides all of the natural gas consumed in Lima and accounts for 50 percent of electric generation in the country. (Photo: Peru's Energy and Mines Ministry)
Wednesday, June 25, 2014

Peru: Camisea, 10 Years of Success

The benefits of
Peru's Camisea gas project have been substantial for the electricity sector.


Inter-American Dialogue 


This year marks the 10th anniversary of the start of production at the massive Camisea natural gas project in Peru. Has the project met its high expectations after a decade in operation, and how successful will the project be in the next 10 years? What factors and market forces are shaping the future of the Camisea project, and the gas sector in Peru more broadly?

Eleodoro Mayorga Alba, Peru's minister of energy and mines: 
The arrival of the Camisea gas and condensates to Peru's energy market in 2004 brought a significant change in the energy matrix. Access to low-cost and high-quality energy in the last decade has increased industrial competitiveness and has been an effective driver of economic growth. The sector trade balance has reached equilibrium, despite the rapid increase in fuel consumption and the decline in crude oil production. The benefits have been substantial for the electricity sector and the central region. It has also caused a decrease in air pollution in cities due to access to cleaner vehicular fuels. The challenge for the next decade is to develop additional gas reserves, and more importantly, to extend the gas use to other regions, making efforts for its utilization not only as a fuel but also as a raw material for the petrochemical industry. The continuation of high rates of economic growth will depend on a secured and decentralized energy supply. The goal is to create a national system of gas pipelines. The next project is the South Peruvian Pipeline whose tender will take place at the end of June. This project will allow access to Camisea gas in the country's poorest region from 2018 onward. Subsequently, there will be another tender for a pipeline to the north-central region and for the construction of rings north and south of Lima. The network will finally be extended to incorporate the reserves of the northwest into the system.

César Gutiérrez, director and consultant at Utilities Peru and a former head of Petroperú:
 The exploitation of Camisea's gas should not only be seen as a cost-effective relationship between Peru's government and private companies, but rather as the beginning of a culture of megaprojects in Peru, where we have all learned and obtained the satisfaction of achievements and also experienced frustrated aspirations. In sum, the balance is positive as expectations about income to the coffers of the state and corporations were exceeded in all instances: national treasury, local and regional governments and universities. Remaining on the list of pending issues is the many-times announced massification of natural gas, understood as the search for the universalization of service, a task that will be very difficult to achieve if the effort is left only to concessionaires. There are also doubts about the environmental handling and optimization of the operation, with growing criticism that in the long-term it will remain unable to commercially exploit as much as 10 percent of the existing liquid reserves. Last on the unfulfilled agenda, it is time to release all the reserves of lot 88 (Camisea) for use of the internal market, which to date is an unfilled political promise. Camisea does not appear in the public debate today, but it would be wrong to think the issue is buried. The trilogy of outstanding issues mentioned could come to the fore at any moment. It will be necessary for the field's operators and authorities to address the unresolved agenda before it becomes politicized, resulting in bad decisions.

Jeremy Martin, director of the energy program at the Institute of the Americas: It is hard to overstate the importance of Camisea. The project has completely revamped Peru's energy matrix to one thirsting for natural gas. Indeed, the project provides all of the natural gas consumed in Lima and accounts for 50 percent of electric generation in the country. Additionally, Camisea has insured that Peru's hydrocarbon trade balance remains positive largely on the back of the natural gas liquids produced. In terms of the broader economy, the project has fostered investment of more than $13 billion and boosted annual GDP by 0.25 percent. This year marks the 10th anniversary of production from Camisea, but the project is also celebrating the 31st anniversary of its discovery by Shell. It is important to note this anniversary to underscore how the project has transitioned from a challenge to an opportunity and economic cornerstone for Peru. The consortium led by Argentine firm Pluspetrol began the project anew in 2000 and first delivered natural gas to Lima in 2004. The consortium overcame major logistical challenges--no roads were built--and primarily used fluvial routes and helicopters to land the requisite equipment--700,000 tons--for the 'offshore on land' operation. In terms of the future, Camisea's past is prologue: the project has unleashed massive demand for natural gas in the Andean nation, primarily for electric generation to sustain one of Latin America's fastest-growing economies. One estimate points to demand for natural gas almost doubling in the country's power sector by 2024. But despite impressive impacts to date, there are challenges for Camisea and Peru's natural gas potential more broadly. Chief among them is the need for enhanced infrastructure. To sustain the huge gains of the last 10 years, downstream infrastructure and pipelines must be a major focus, particularly the long-awaited Gasoducto del Sur project.

Republished with permission from the Inter-American Dialogue's daily Latin America Advisor 


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