The environmentalists' objections to Camisea are serious enough to have drawn a statement from President Alejandro Toledo that the project would go ahead come what may. Toledo said that the project is a priority for Peru. He said that when the project is up and running, probably in August 2004, it should increase the country's rate of economic growth by 1% a year.
Camisea holds 11 trillion cubic feet of gas. The pipeline to bring the stuff from the jungle near Cusco is underway. The government hopes that the gas will restore the country's position as an energy exporter. Peru used to export oil from its offshore fields in the north of the country, but these fields have run down and the country is now a net importer of hydrocarbons.
The environmentalists do have a lever. Their complaints are threatening US$220m in credits from the IDB and Japan's Eximbank to handle the processing of the gas in Lima and the final part of the pipeline. The two banks have already postponed the approval of the credits after complaints from local environmental groups such as Foro Ciudades para la Vida and the Sociedad Nacional de Ambiente. These groups say that the processing plant, which is scheduled to be built on the coast, is in an unsuitable place: in a nature reserve in Ica. The environmentalists also claim that the project is damaging habitats in the jungles around Cusco.
Toledo underlined how important the Camisea project is to the country by saying that it would allow the country to cut energy costs for industry by about 20%. Furthermore, the country could save the US$2bn or so it currently spends each year on importing energy. He argued that the project would also enable the country to develop a petrochemicals industry and reduce pollution. He noted that gas is a much cleaner fuel than oil, which is currently used to produce electricity.
Bolivia
Paul Jordan, a senior executive from British Gas (BG), the main component of the Pacific LNG consortium backing the project to bring gas from Tarija to the Pacific coast, said that the project was in danger of losing its market. He argued that California, the ultimate destination of the gas, would buy from either Bolivia, Camisea, Russia or Alaska. Jordan added that competing projects, such as Camisea or the transfer of gas from Alaska to the West Coast of the US, were now much further advanced than the Bolivian project.
The main reason for the delay is the Bolivian government's inability to decide whether to ship the gas to the coast in Peru or Chile. The Chilean option is much cheaper, but Bolivia is still smarting from its defeat by Chile in the War of the Pacific 130 years ago. The Bolivian government said that it will decide between Peru and Chile at the end of the year.
Jordan grumbles that the Bolivian authorities have been dithering now for a couple of years over which option to take. He said that in that time the project has lost the lead it enjoyed over its rivals. He said that he did not want to threaten the Bolivian government or give it an ultimatum, but it was undeniable that competing projects were developing faster than the Pacific LNG one.
The BG senior executive stressed that Pacific LNG has invested US$300m in the Margarita field in Tarija and would invest a further US$100m. He said that BG and its partners, Repsol-YPF and Panamerican, were still backing the project.
He noted that the Camisea project has some strong political connections in the US. Halliburton, the former employer of the US Vice-President Dick Cheney, is involved. Sempra, the ultimate purchaser of Bolivian gas in California, has already signed a deal to buy Alaskan gas.
Jordan points out that all is not lost for Tarija. The great advantage of the Bolivian project is that the Tarija reserves hold much more gas than either Camisea or Alaska.
Why
The Bolivian government has been putting off a decision on which Pacific port to use because of the traditional anti-Chilean feeling in Bolivia. The government of President Gonzalo Sánchez de Lozada is highly unpopular, with opinion poll support of just 9%. It fears, with good reason, that the choice of a Chilean port to ship out the gas and the associated liquefaction plant could trigger protests.
Jorge Berindoague, the Bolivian energy minister, said at the beginning of August that the government would definitely make its choice by the end of the year. President Goni said that he would start consultations, with various parts of Bolivian society about which port to choose in October. These consultations will be preceded by a public relations campaign.
Jordan is not alone in criticising the governments' delay. The interim government should have taken the decision last year, but left it to the new government. Raúl Kieffer, the president of the Cámara Boliviana de Hidrocarburos, agreed that the project could be abandoned unless the government got its act together. He said that it would be a tragedy if this happened because the country would lose an opportunity to speed up its development.
If the Californian project falls through, the only options would be to increase exports to Brazil or Argentina. Neither country has the potential demand of California, gasmen admit.
Jeffery Sachs, the international economist and longstanding adviser to President Gonzalo Sánchez de Lozada, admits that Bolivia's economic development depends on increasing its gas exports. Sachs argued that the recovery in Brazil and Argentina in the past year was likely to increase demand for Bolivian gas. He claimed that the future for Bolivia was rosy.
Prices
Unlike the gas export deal with Brazil, the contract with Sempra, if it is agreed, will not have fixed prices. The contract will use daily market prices. Jordan said that this was because there was a proper market in California and Bolivia would have to compete in that market. The good news for Bolivia is that demand for gas in California is strong: so prices are around US$2 per million BTUs. If this price holds, Bolivia could expect to earn US$5bn from exporting gas to California over the next 20 years.
Jordan said that the gas price in California could rise to US$4 per million BTUs. He did not expect the price to weaken much below US$2 per million BTUs.
The Brazilian gas contract guarantees that Bolivia will get US$90m in gas receipts from Brazil each year. Brazil is paying just under US$2 per million BTUs.
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