Peru: demand for natural gas increased by 80 percent due to greater consumption by thermoelectric power plants, industry and vehicles

Demand for natural gas has increased by 80 percent in the past year due to increased consumption by the country’s thermoelectric power stations, industrial sector and vehicles, said the Minister of Energy and Mines, Juan Valdivia.

But though Peru increased its natural gas production by 38.4 percent from January to July to reach 53,741 million square feet, supply is unable to meet demand, official state news agency Andina reported.

The problem isn’t consumption, Valdivia said, but the small transport duct that makes it impossible to meet the increasing demand.

The duct, which has a total capacity of 290 million square feet, was designed to supply natural gas until 2015.

But in the short span of four years, Valdivia said, it has already topped its own capacity.

Peru’s Gas Transportation Corporation, or TGP, must increase the duct’s capacity to 450 million square feet by resorting to compression, which will allow transportation to rise from 290 to 380 million square feet, argued Valdivia, and must also build a second duct by the end of 2009.

Although the Camisea Gas Project, known as Block-88, is one of Latin America’s key energy infrastructure projects, the construction and exploitation of two pipelines as well as a distribution network that would make natural gas widely available for domestic consumption and export, has been a drawn out process, plagued by delays.

Extraction is actually taking place in Block-88 – where some geologists claim lie more than 30 trillion square feet of natural gas – Blocks 56 and 57 are being evaluated and drilling is to begin at Block-58 early next year.

As world oil prices skyrocket, Peru is looking to convert on a wide scale to low-cost natural gas – the government has fixed the price of natural gas at 4.30 soles, or about $1.50, per gallon and is allocating credits to allow people to convert their engines more easily – to reduce the current hydrocarbon deficit and the country’s dependence on costly diesel and liquefied petroleum gas imports.

But some energy analysts have said President Garcia, and his predecessor, former President Alejandro Toledo, were too quick to cut deals to allocate up to 30 percent of Peru’s known natural gas reserves for export. That energy will be needed for domestic use in coming years, they say, to generate electricity and power water desalinization plants as Peru’s quickly melting glaciers disappear, depriving the country of drinking water and hydroelectric energy.

Since Jan. 2008, Perupetro, a private law state-owned company responsible for promoting the investment of hydrocarbon exploration and exploitation activities in Peru, has generated 421,74 millions soles, or approximately $149 million in the month of July, and approximately 2,272 millions soles or $809 million since Jan.

The funds were transferred to Peru’s regional governments as well as Camisea’s Socioeconomic Development Fund, or Focam, the Armed Forces and National Police Fund, and the Public Treasury.

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