Peru: Pipe dream

Reviled by activists for encroaching on the Amazon forest and its indigenous peoples, Peru’s Camisea gas pipeline project may nonetheless be a crude prototype for developing sensitive energy sites.

On August 5, deep within Peru’s remote Amazon basin, President Alejandro Toledo gave the order for technicians to open the valves at the shiny Las Malvinas gas-separation plant. Natural gas from thousands of feet below the jungle began coursing through twin steel pipelines wending their way from the Camisea field across the Andes and down through the desert to the coast. There, after a meandering 440-mile journey to Lima, gas from one pipeline was put to work producing power for industry in the capital. Roughly 150 miles down the coast, at Paracas Bay, the other pipeline began disgorging gas condensates for processing into butane and propane for export.

The arrival of this precious natural resource was greeted with jubilation by the Toledo government.

“Mission accomplished,” the president declared. “Thanks to Camisea, Peru will go from being an energy importer to a net exporter, beginning in 2007.” Toledo expansively proclaimed that Camisea would add 1 percentage point annually to Peru’s GDP over the project’s 33-year life plus an additional 1 percentage point annually for 18 years once the exports begin in earnest in three years.

The festive mood in the capital, however, was not shared by everyone. Anti-Camisea activists who have challenged the pipeline every cubic foot of the way demanded that the Inter-american Development Bank, the project’s leading outside financial backer, provide for independent monitoring of Camisea. Their professed aim: to ensure that the private sector companies that constructed and now operate the pipeline are adhering to the IDB’s instructions for scrupulously avoiding unnecessary damage to the environment or harm to the indigenous peoples who live in close proximity to the gas field and the pipeline.

“The IDB has always supported the idea of having a monitoring system that was approved by civil society,” says Robert Montgomery, the bank’s environmental point person on the Camisea project. The bank is negotiating an acceptable monitoring arrangement with, among others, indigenous groups.

Camisea has been producing controversy for far longer than it has been generating power. The project was conceived nearly two decades ago and, in its much-modified current form, is seen by the government as a way for Peru to tap its substantial natural-gas reserves to reduce the country’s dependence on expensive imported fuel, obtain precious export earnings by supplying gas to the U.S. and Mexico and provide cheap, clean energy for Peruvian industry and consumers.

The huge complication all along has been that the gas happens to be buried in one of the most ecologically rich corners of the world -- the Amazon rain forest of southeastern Peru. What is worse, three quarters of the prime gas field, Block 88, falls within the protected Nahua-Kugapakori Reserve of two of Peru’s indigenous groups, and the pipeline’s route to the coast cuts through dense jungle that is home to 10,000 native Indians. (The parallel with the Alaskan oil pipeline in the U.S., which traverses the Alaskan National Wildlife Refuge and the home ground of native Inuits, is striking -- though the Inuits, unlike Peru’s natives, own subsoil rights.)

“This area was entirely pristine before Camisea -- 98 percent intact -- so the companies are carving a pristine area of the Amazon into an oil and gas frontier,” laments Atossa Soltani, executive director of Malibu, Californiabased Amazon Watch, which has been among the most vehement critics of the project. It is hardly alone in its opposition, however.

Indeed, Camisea has become something of an international cause celebrity, particularly in the U.S. Actors Kevin Bacon, Chevy Chase and Susan Sarandon and singers Rubén Blades and Sting were among the entertainers urging the IDB to reject a request by the project’s foreign and Peruvian private sector sponsors last year for a $75 million loan.

“Very powerful spotlights have been trained on the Camisea project,” Peru’s Energy and Mines minister, Jaime Quijandría, acknowledges in an interview with Institutional Investor. But he says that the intense scrutiny has resulted in “higher standards than before” for all energy ventures in sensitive territory. The Energy minister goes so far as to thank Camisea’s critics. “They have made us react in a positive way, because we understand that protection of the environment and social communities is part of the evaluation made by financial entities and has to be done so that projects can reach a good outcome,” Quijandría says. In the case of Camisea, he adds, “all the technology is environmentally friendly. The platforms don’t touch the jungle. The whole project was done without authorizing roads in the jungle.”

Hardly less amazing, the $1.2 billion first phase of Camisea was done without public or bank financing of any kind. The project’s sponsors -- Peruvian and foreign energy and building companies -- have had to foot the entire construction bill to date. That financing dry well may be yielding something at last. In October or November, the IDB expects to begin disbursing its $75 million, 14-year general purpose credit; in addition, the bank intends to arrange on Camisea’s behalf a $60 million so-called B-loan, or series of syndicated bank credits on favorable terms that run up to 12 years.

“We received the news of the loans with extreme pleasure,” says Fernando Deustua, who handles institutional relations for Transportadora de Gas del Perú (TGP), the consortium that built and operates the pipeline itself.

The IDB loan opens the financial spigots. The Andean Development Corp., the government-sponsored regional project lender, is now poised to release $125 million in preagreed funding, and the Banco Nacional de Desenvolvimento Econômico e Social, Brazil’s development bank, is moving forward with plans to lend $100 million so that Camisea can settle up with Brazilian pipe makers. And the “downstream” consortium operating the pipeline (as distinct from the “upstream” consortium that did the drilling) raised $270 million in August by issuing 15- and 25-year bonds aimed at Peruvian pension funds, mutual funds and insurance companies. Further financing is now likely to be arranged as needed through Peruvian banks.

“The Camisea project represents a unique approach toward structuring private sector project financing for the natural-gas sector,” says Philippe Birebent, a senior investment officer of the IDB and the bank’s team leader for the Camisea project. For a start, the loan document was laden with clauses spelling out in considerable detail the social and environmental conditions to be met. But what really sets the loan apart is a special cross-default provision: In a precedent for the IDB, the bank stipulated that if Argentina’s Pluspetrol Perú Corp. and the other upstream consortium members don’t fulfill the bank’s environmental and social terms at the drilling and processing end of the project, then the downstream pipeline consortium led by TGP will be declared in default on the IDB loan and have to accelerate payments.

“We negotiated a cross-default on the downstream,” brags Birebent. To the CEO of TGP, Alejandro Segret, the matter is clear cut: “The IDB has contributed value-added in bringing to the project standards that have made of Camisea a new benchmark.”

For all the controversy, some analysts say that Camisea could emerge as a rough model for how to (and in some cases how not to) go about developing an environmentally and socially sensitive oil and gas site in a world clamoring for energy.

Susan Ruth, director of environmental strategy at Cambridge Energy Research Associates, a global energy consulting firm based in Massachusetts, contends that there is a “global convergence” of three factors affecting all big natural-resources projects: economic growth spurring demand, widespread need for energy infrastructure, and escalating environmental and social concerns. Camisea, says Ruth, who has more than 25 years of experience analyzing how energy and environmental conflicts can be resolved, “is an example of the struggle to find the best solution that acknowledges the importance of all three factors.” Adds former Peruvian central bank president Richard Webb, who is the director of the Center for Economic Research at Lima’s Universidad San Martín de Porres, “It’s a daring project for a multilateral bank [like the IDB] -- infrastructure was taboo, energy was taboo, and social and environmental issues are difficult.”

Development and commercial banks along with governments and energy companies are studying Camisea closely for pointers on developing virgin terrain while causing the least social and environmental disruption -- and also containing the political damage. “We spent a great deal of time making the [pipeline] sponsors understand environmental and social requirements -- we wanted to make sure the project was viable,” says the IDB’s Birebent.

The bank promulgated no fewer than 25 stringent environmental and social standards that Camisea had to meet to obtain funds. For one thing, the development bank decreed that the trench carrying the project’s parallel pipelines had to be covered over with topsoil and replanted with native seedlings. Moreover, drilling in the fecund Camisea reserve, which is thought to contain 9 trillion cubic feet of natural gas, has been conducted from the very outset on an “offshore” basis: Rather than build access roads that would disturb the jungle and its inhabitants and potentially lure visitors and even settlers, Royal Dutch Shell in the 1980s and the oil and gas companies that succeeded it have delivered workers and equipment to drill sites by boat or by helicopter. The extra environmental effort is considered well worth it: The Camisea field is thought to contain enough gas to supply Peru’s main cities for 25 years.

The project is as complex as it is controversial. The Malvinas gas-processing plant lies fully 267 miles east of Lima in the Ucayali River valley of the Amazon basin; the twin pipelines snake over the Andes, hitting 15,945 feet, and make several bends to avoid a spiritual sanctuary (home to the gods of the Machiguenga people) and other sensitive areas along the route.

In phase one of Camisea, purified “dry” gas is being shipped in one pipeline to Lima for use as fuel, while “wet” gas, consisting of natural-gas liquids such as ethane, propane and butane, is being routed along an accompanying pipeline until it diverts to Paracas Bay, down the coast from Lima, where a fractionation plant processes it for domestic and export markets. This site also contains a distillation tower for producing naphtha for export and diesel for domestic use. The Paracas plant, which began operating August 7, is in some ways an even more contentious issue than the Amazon basin drilling field: It sits next to Peru’s only marine refuge.

In phase two of Camisea, scheduled for completion in 2008, a liquefied-natural-gas plant on the coast somewhere south of Lima (the exact site remains a matter of dispute) will freeze gas for shipment in LNG tankers to Mexico and probably to California, too. That project also provokes intense reactions from environmental activists.

The upstream consortium, the one pumping the gas out of the ground and processing natural-gas liquids at Paracas Bay, is led by Argentina’s Pluspetrol Perú and Tecpetrol del Perú (a subsidiary of Argentina’s Techint Group), the U.S.'s Hunt Oil Corp. and South Korea’s SK Corp. The downstream consortium, the pipeline builders and operators, looks much the same: Its key members are Hunt, Pluspetrol, SK and Techint subsidiary Tecgas, along with Algerian oil giant Sonatrach and Peruvian construction company Graña y Montero. Belgian engineering firm Tractebel handles the gas distribution system in Lima. Taking the upstream and downstream components together, Pluspetrol, Techint (through Tecpetrol and Tecgas), Hunt and SK own about 78 percent of phase one of the Camisea project; private interests, Peruvian and foreign, account for the remainder. The government of Peru has not invested a single sol in the project.

Nonetheless, Lima has an enormous stake in Camisea. The government declared the project a “national priority” for good reason: The economic benefits for Peruvians are huge. The IDB, the linchpin backer of phase one, estimates (along with Toledo) that Camisea will in the early years add nearly 1 percent to Peru’s GDP, cut fuel imports by half and improve the country’s trade balance by nearly $500 million a year. Taxes from the project are expected to bolster Peru’s federal revenues by $1.36 billion over its 33-year lifetime and provide a significant increase in regional investment, primarily in the state of Cuzco, where the gas is pumped out of the ground. This relatively poor region should collect more than $50 million in royalties every year for the next decade. In addition, Camisea is expected to reduce the cost of electricity and generate overall energy cost savings of about $3 billion in toto over 30 years.

For the 8 million Peruvians who live in the capital, one especially welcome effect of the advent of clean, natural-gas-derived fuel will be seen, and smelled, in the form of fresher air. The plan is for Lima’s fume-belching buses and smoke-spewing taxis to be weaned off dirty gasoline and diesel within a decade, assuming funding can be found.

The potential economic boon is not Peru’s alone, either. Hunt, Pluspetrol, Techint, Graña y Montero and other consortium partners stand to reap double-digit margins on phase one. “For a company to take on something like this, given the risk, you’d want to see something certainly in the double digits, in the 20 to 25 percent range, to leave yourself room in case something goes wrong,” notes Jed Bailey, director of research for Latin America at Cambridge Energy Research. Norberto Benito, CEO of Pluspetrol, the lead company for the upstream portion of the project, agrees with that assessment. “At Pluspetrol we don’t enter a project with an internal rate of return of below 20 percent,” he says. “Our purpose is to operate Camisea for many years, not to sell the project.”

Camisea’s $2.5 billion phase two, expected to get under way any time now, calls for Hunt, SK and any other financial backers they can coax to come in on the deal to build, own and operate the LNG plant down the coast from Lima. “We will have the ability to export LNG in 2008,” says Energy Minister Quijandría. For the moment, however, work on the project is being held up by a tug-of-war between the adjoining towns of Chincha and Cañete over which should get to host the plant. That should be resolved soon, however, because of the heavy federal impetus behind the project; Hunt anticipates a decision by mid-October.

The activists don’t dispute that the Camisea project will be an economic godsend to Peru. But, they ask, at what cost in irreparable harm to the Amazon wilderness and to the country’s native peoples? The wells and gas-separation facility are situated in hitherto unsullied jungle that is home to four indigenous groups, numbering about 2,000 people. Francis Grant-Suttie, director of private sector initiatives for the World Wildlife Federation in Washington, D.C., describes this southwest section of the Amazon basin as “one of the most important tropical forests on the planet.” Among the rare and exotic birds the region boasts are the selva cacique, the scimitar-winged piha and the vermilion tanager. Moreover, say the project’s detractors, Camisea’s twin pipelines pass through the sensitive lower Urubamba River valley, whose several thousand inhabitants include a number of isolated ethnic groups.

Considering how fraught with problems any big project in Camisea’s circumstances was bound to be, the role of the IDB in championing it has been surprisingly bold and innovative -- and in many ways indispensable. At a time when such multilateral institutions as the World Bank have been shying away from emerging-nation energy projects because of their political sensitivity, the IDB stepped in unhesitatingly. (The World Bank, after a two-year review, did say in August that it would again fund oil, gas and mining projects under strict conditions.) On September 10, 2003, the IDB’s board approved the $75 million for the downstream consortium. That credit, in turn, is to be followed up with the $60 million B loan.

But in March the IDB, to underscore its commitment to environmental and social standards, postponed disbursement of the $75 million until it could be assured of adequate safeguards on Camisea. “At the heart of the project,” reads the bank’s overview document, “is a commitment to make Camisea a model for environmentally and socially responsible infrastructure development in Latin America, the Caribbean and, by extension and example, elsewhere throughout the world.” As Montgomery, the bank’s environmental point person for Camisea, notes, “The easy projects can be done by the private sector or the government itself -- that’s not the role of a development bank.”

Although Camisea got going well before the International Finance Corp., the World Bank’s private sector lending arm, came out with the Equator Principles for responsible energy development in June 2003, the IDB was able to incorporate many of those precepts into its Camisea guidelines. Among them: strict rules to avoid encroaching on indigenous peoples (contact between workers and natives, for instance, was forbidden); restrictions on all drilling that was not part of the original project blueprint; public release of environmental impact statements on the Paracas Bay and other coastal facilities; strategic environmental planning (including replanting with native species where required); streamlined legal processes to help residents of the lower Urubamba region, along the pipelines’ path, fend off migrants and other intruders; and thorough, continuous monitoring of every aspect of the project. The bank also demanded that Lima set up a mechanism to coordinate government responsibilities and monitor the project over its 33-year life, bringing together 11 separate government agencies (an unprecedented show of cooperation among Peruvian bureaucracies).

Environmental critics appreciate the bank’s initiatives but remain skeptical. “We’re trying to get IDB environmental standards at least up to World Bank standards,” says the World Wildlife Federation’s Grant-Suttie. “The IDB has the chance to leapfrog from the bottom of the heap to a leadership position on environmental and energy policy, infrastructure and indigenous peoples.” He adds, “We’re also trying to influence large investment houses to pay attention to social and environmental criteria.”

The bank’s July report that Camisea was satisfying the environmental and social stipulations aroused the project’s opponents. Conservation International, based in Washington, D.C., joined eight Peruvian interest groups in complaining in a letter to the IDB that the revegetation effort was using nonnative plants, that the health of indigenous groups had not been accurately assessed and that there hadn’t been a proper baseline biodiversity study of Paracas Bay.

PERU’S NATURAL GAS HAS TAKEN millions of years, plus 20, to reach the market. Royal Dutch Shell discovered the vast reserve in 1983, but development didn’t get started until 1996. Shell and Mobil Corp., its partner in the project, abandoned the Camisea field altogether two years later when Peru’s then-president, Alberto Fujimori, demanded that the companies build an uneconomical 500-megawatt power plant in the jungle.

The current Camisea pipeline is very much identified with President Toledo, whose regime could certainly stand a boost (Institutional Investor, March 2004). Chilean research firm Latinobarómetro released a poll in mid-August showing that Toledo was in fact Latin America’s least popular leader, with just 8 percent of Peruvians supporting him. Camisea is “the economic project of the administration,” says Energy Minister Quijandría. The gas is arriving on time thanks in part to the Toledo administration’s constant goading -- and its threat of a $100 million penalty for being late.

So critical is the gas to Peru that the project never encountered the kind of domestic political opposition that could have scuttled it. “The project has our sympathy and backing,” declares Jorge del Castillo, secretary general of the strongest opposition party, Alianza Popular Revolucionaria Americana.

The pipeline did suffer one outright attack: On June 9 of last year, 200 Shining Path guerrillas swooped down on a work camp in Toccate, 210 miles southeast of Lima, and kidnapped 71 workers. However, they were rescued within 36 hours by the Peruvian army with no casualties on either side (and, reportedly, no ransom paid).

The Toledo government contends that, wholly apart from the obvious energy benefits of Camisea, the project, on balance, is good for the environment. Camisea “is going to change the energy matrix, make the country less dependent on imported fuels and, last but not least, have an important [positive] environmental impact -- even though many say we are assaulting the environment,” says Quijandría.

He and other officials argue that substituting clean-burning natural gas for fuel oil and diesel should reduce pollution at power plants and factories. And over the next decade, Lima plans to replace the engines of buses -- 18,000 in the capital alone -- with new ones that use compressed or liquefied natural gas. Pluspetrol, meanwhile, is cooperating with private companies to offer financing and incentives to promote the conversion of cars and vans to natural gas.

That cleaner air comes at a cost, Camisea’s critics point out. The Paracas Bay shipping terminal and fractionation plant, which are located within the buffer zone of Peru’s only marine reserve, has been a flash point of environmentalists’ protests and, not incidentally, a focus of the IDB’s concerns. The plant sits just four miles from the 136,000-acre park, which abounds in sea lions, seals and sea otters.

Delmar Blasco, former secretary general of the Ramsar Convention, a United Nations consensus on wetlands, objected to the placement of the terminal. A senior development official declares that Lobería Beach, where the terminal is located, “is a stupid site, on the edge of the only marine park in Peru, in an area every political figure can get to. The government lost the chance to be a hero by siting it elsewhere.”

Carlos Loret de Mola, who heads the government’s National Environmental Council, is the official who has been given the challenging task of creating a sustainable development program for Paracas Bay. “Once the political decision was made” to go with that location, he says, “the criterion became zero tolerance.” The IDB accordingly requires Pluspetrol to treat Paracas Bay and its environs as an inviolate sanctuary.

The original plans for the site, for instance, contemplated a nearly two-mile-long pier carrying the pipeline out to a loading dock for tankers. “People said, ‘What a horror, it will ruin the view!’” says Pluspetrol general manager Benito. So the design was radically revised; now it calls for running the pipeline underwater. Ships cannot discharge bilgewater into the bay. Fill from the pipeline trenches must be transported to a harmless site 25 miles north of the marine park. To monitor the condition of the bay’s water before, during and after construction, the consortium is funding 11,000 measurements a month, reports Benito. This, by the way, is for a bay that is already fouled by effluents from seven fish-meal plants and a tin foundry and the runoff from mining and coastal farming. As part of the deal, Pluspetrol and the rest of its consortium must ante up $23 million to clean up the bay.

To minimize damage to the delicate rain forest, Pluspetrol followed the lead of Shell in approaching the drilling field, which covers nearly 50,000 acres, as if it were an offshore island: Equipment, supplies and staff are all brought in by air or river. Similarly, elaborate procedures were followed in laying pipe. Barges delivering 12-meter segments from São Paulo had to moor in the middle of jungle rivers at night to prevent “noise pollution” from disturbing wildlife and the indigenous peoples in the hamlets along the way, TGP’s Segret says.

The parallel pipelines are buried 0.8 to 1.2 meters below ground for most of their length, and topsoil was carefully set aside to cover them. TGP hired indigenous people to cultivate 500,000 seedlings of native plants to cover the pipelines’ right-of-way. Segret adds that the consortium negotiated 2,500 easements with jungle and highland communities, never once invoking its right under the concession to expropriate land. Between them, TGP and Pluspetrol paid out more than $2 million in compensation for crop losses and other economic damage during the construction phase.

Both Pluspetrol and TGP maintain community relations staff whose sole mission is to control contact with indigenous people, hear their concerns and channel support to them for communal projects, such as health clinics and community centers. All visitors to the native villages must be vaccinated against influenza and yellow fever -- to protect the inhabitants against them, not vice versa. The consortium’s community relations staff has set up a museum of native artifacts at Las Malvinas, the site of the gas-separation plant.

Pluspetrol’s Benito and TGP’s Segret estimate that they devoted as much as 75 percent of their time in the early stages of the project to social and environmental issues. TGP officials held 1,400 consultations with community groups.

The executives are acutely aware of the project’s sensitivity. “The precaution is that this time they let us in the jungle -- who knows if in the future they will allow us, so we’re taking advantage of this [opportunity] to disturb things only once,” says Benito. It’s no accident that the pipelines can carry three times the capacity currently needed.

FOR ALL OF PLUSPETROL AND TGP’s efforts at both standard-setting and public relations, international and national watchdog organizations have not stopped denouncing Camisea. Critics charge that the project is putting the health of indigenous people at risk, causing outbreaks of respiratory disease, diarrhea and syphilis. They also say that it’s scaring away game and killing fish in native hunting grounds and triggering soil erosion, landslides and silting of streams. “We believe the presence of companies inside the [Nahua-Kugapakori] reserve represents a direct threat to the lives and future of indigenous peoples, who are very isolated and vulnerable to epidemics,” says Amazon Watch’s Soltani.

Official reports confirm some of the allegations. A government spot inspection in September 2003 supposedly found that pipeline-builder TGP had not restored topsoil, repaired drainage, disposed of solid-waste pollution or cleaned up after a diesel spill on the pipeline right-of-way in one sector of the jungle. TGP institutional relations manager Deustua contends that the report was released “when the project was in its construction phase, and revegetation comes later; today the right-of-way is revegetated and completely clean.”

Constructing the pipeline route inside the Machiguenga communal reserve caused “significant impacts,” the report said. It called upon TGP to clean up soil erosion at the site and correct “irreversible changes in the landscape and loss of biodiversity.” TGP’s Deustua responds that the company’s “erosion-control team is taking measures to put a brake on the erosive effects and paid compensation [to local residents] even though there were no crops grown in those locations.” And he argues that “it takes a while, but nature returns to its normal course -- [the damage] is not irreversible.” The government agency that supervises energy investments has nevertheless imposed a fine of more than $680,000 on TGP for environmental damages. “We’ve appealed,” says TGP’s Segret. “We are not in agreement with the fine.”

A December 2003 study by Peru’s Health Ministry, which was leaked to the press in April, found that the Nanti people, who live in virtual isolation outside the core drilling area, Block 88, were visited repeatedly by company workers and as a result face potentially deadly infectious diseases.

Pluspetrol’s Benito responds to the health concerns by saying, “We must be objective.” He explains: “Pluspetrol asked the University Cayetano Heredia, locally recognized for its dedication to health issues, to carry out a comparative study of the health situation in four communities, two within the zone of direct influence of the project and two outside. The conclusions demonstrated that the health situation of these groups has not changed [for the worse] owing to the project.”

A persistent concern is that the pipeline project will invariably open up the remote Urubamba River region northeast of the famed Machu Picchu ruins to migration and settlement. The companies behind Camisea have a responsibility to see that the pipeline does not become a thoroughfare, contends Alexander Watson, former U.S. ambassador to Peru and the IDB’s liaison with Peruvian agencies. Lima has yet to draft an access-control plan. Watson, who was assistant secretary of State for Inter-American affairs under former president Bill Clinton, says one lesson of Camisea is that “the IDB should have gotten involved at the outset.” That way, he says, the bank wouldn’t find itself “forcing the Peruvian government to modify things that had been agreed upon.” Other lessons, he adds, are that local government’s “commitment and capacity” to deal with environmental and social issues must be strengthened and that it is critical to “engage in a constructive manner” with all those affected by a project, even if that poses early complications.

For all its troubles, Camisea is, for better or worse, a beachhead for future energy development in Peru. Lima has granted exploration concessions elsewhere in the Amazon basin to Spain’s Repsol YPF and the U.S.'s Occidental Petroleum Corp. On August 9 the government announced an instantly controversial concession to North American oil companies Amerada Hess Corp., Occidental Petroleum Corp. and Talisman Energy to drill for oil in Peru’s northern jungle region; environmentalists joined by the region’s Achuar tribal groups contested the plan. Pluspetrol has until 2014 to explore the Cashiriari field and perhaps other sites within Block 88, which encompasses Camisea. Says Pluspetrol’s Benito, “For us and Repsol, they will demand at the least what was required in Camisea.” The government hopes to draw investors to the promising greater Amazon region and eventually open up major portions of the southeastern region of Peru’s Amazon basin to prospecting and exploration.

“We are establishing a welcoming environment for investors,” says Ronald Egúsquiza, promotion and planning manager of Perúpetro, the government agency that promotes energy projects. Peru, for instance, automatically adjusts royalty fees downward if a particular field turns out to be less productive than anticipated. Says Egúsquiza, “The situation in Peru is totally different from the situation in Ecuador and Bolivia,” an allusion to disputes in those countries between the government and energy producers. A national referendum in Bolivia in July decided to allow tapping the country’s vast gas reserves for export, but many hurdles remain.

“We are the Andeans, who are the natural allies of the U.S. -- we are dependable,” says Energy Minister Quijandría.

The Camisea project, however, established painfully that future energy projects in sensitive settings in Latin America must meet much more demanding standards than past projects. As TGP’s Segret puts it, Camisea’s approach to “environmental and social issues and construction will be the point of reference for all other projects.” Will that be enough?