The World Bank’s International Finance Corporation, IFC, approved a $300 million loan on Tuesday for Peru LNG, the second phase of the Camisea natural gas export project requiring a total investment of $3.8 billion, the largest foreign direct investment in Peru’s history. The project has already received funding from the U.S. Export – Import Bank, which approved $250 million, and the Inter-American Development Bank, which was the first bank to brush off environmental and social concerns by authorizing $400 million in December 2007.
The project will create a 253-mile pipeline and a natural gas liquefaction plant and marine loading terminal some 105-miles south of Lima on Peru’s pacific coast. The pipeline will transport natural gas from the Camisea gas fields through an existing pipeline network to the LNG plant. It is expected to generate $230 million a year in incremental royalties and $90 million in income tax revenue for Peru’s government. Most of the natural gas will be exported with markets in Mexico and possibly Chile and the United States.
The IFC says its strategy in Peru is to address private sector challenges by focusing on sustainable development. “In Peru LNG we have found a partner who shares our commitment to supporting economic development through private sector investment,” said the IFC director and head of the World Bank’s Oil, Gas, Mining, and Chemicals department, Somit Varma. “IFC plays an important role in helping ensure that project benefits reach the people that need them most.”
However critics say the Camisea energy project has caused health and social problems for thousands of native people by infringing on indigenous land and contaminating a biodiversity hot spot in Peru’s south-east Amazon basin.
Several energy and environmental analysts also contend that Peru is making a mistake with plans to export such a large portion of its known natural gas reserves. Accelerating glacial melting caused by global warming threatens to drastically decrease the nation’s fresh water supply, which is expected to drastically impact irrigation for coastal. It could also possibly cripple hydroelectric generation, which accounts for about 70 percent of electricity production.
The project consortium is led by Texas-based Hunt Oil and includes Spain’s Repsol YPF, South Korea’s SK Energy, and Japan’s Marubeni Corporation.
