Southern Peru $1.4 billion natural gas pipeline construction contract awarded to subsidiary of New York-based Conduit Capital Partners LLC

Amidst an oil kickback scandal implicating two top state oil company executives and government insiders, Peru President Alan García awarded Kuntur Transportadora de Gas S.A.C. a 30-year concession contract to build a $1.4 billion pipeline that will carry natural gas 700 miles from Peru’s Camisea gas fields to the port of Ilo in Southern Peru.

“I don’t want anyone saying that there are no programs (or) projects for the South, no one should cheat the truth by resorting to demagoguery,” said García Tuesday during the official signing ceremony of the concession contract in Cuzco, one of the main cities along the proposed pipeline route.

Construction of the 700-mile pipeline, known as the Gasoducto Andino del Sur, or GAS, is expected to begin in 2010 and it should be operational by the end of 2012.

Kuntur, a subsidiary of New York-based Conduit Capital Partners LLC managed via its Cayman’s subsidiary, Cusco Pipelines LTD, applied for a 30-year concession to construct and operate the GAS on March 14.

A few months later, on July 7, the Minister of Energy and Mines Juan Valdivia — who resigned Monday when an oil kickback scandal widened — announced that Kuntur’s application had been approved. The Concession was awarded on Sept. 16 and official signing simultaneously took place on Oct. 6 in Cuzco, Arequipa and Ilo.

But, although there were other bidders, the project was not put out to tender, said former Minister of Energy and Mines Carlos Herrera in comments to daily La República. The contract was simply awarded to Kuntur, he contended.

“Very little is known about the contract and the conditions by which Kuntur will carry out the project,” said Arequipa mayor Simón Balbuena in comments to Radio Nacional. “To be transparent the government should make (the contract) as well as the commitments it took on when it granted the concession public.”

Conduit’s involvement with the project dates back to 2007, when the firm committed the funds to preliminary technical, economical and environmental studies.

Then, in September 2008, Conduit presented a construction completion bond for $66 million — which represents 5 percent of the pipeline’s total cost — to secure the concession.

Conduit, via its subsidiary Kuntur, is now to begin the full development of the project. This includes the signing of firm offtake contracts, environmental studies, engineering, financial and economical structuring as well as the incorporation of any additional equity participants.

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