Energy Minister to renegotiate part of energy contract with international consortium

Energy Minister Juan Valdivia announced a plan to renegotiate parts of an energy contract that will export natural gas from the Camisea gas fields, located in Peru’s south-east Amazon basin and thought to hold some of the largest undeveloped gas reserves in South America. Valdivia said they will sit down with Peru LNG, the consortium responsible for the second phase of the natural gas export project, to negotiate terms that would allot part of the supply for Peru’s internal market, daily El Comercio reported.

The Camisea gas fields were originally thought to hold 10.86 trillion cubic feet, TCF, of natural gas. However in early January, the Pluspetrol oil company told Peruvian authorities the gas fields have about 20 percent more than those estimates, holding 13.40 TCF of natural gas.

Natural gas from Block 88, accounting for almost 80 percent of Camisea’s reserves, was originally intended to supply Peru’s internal market. However Peru LNG is planning on exporting most of the gas to Mexico at a rate of 500 million cubic feet per day. The export contract provides the consortium with 620 million cubic feet, leaving a 120 million surplus.

Valdivia told El Comercio 20 million cubic feet of the consortiums surplus will be used for a natural gas liquefaction plant south of Lima on Peru’s pacific coast. He added they will try to negotiate for part of the remaining 100 million cubic feet to supply Peru’s growing internal demand.

Energy specialist Aurelio Ochoa reportedly said the government should use the opportunity to renegotiate other aspects, including control of the installations after the contract expires. “They awarded them the concession without their investment in exploring,” said Ochoa. “Their return has been around $15 billion, so that aspect seems reasonable.”

Former Energy Minister Carlos Herrera Descalzi says the talks represent a step forward, however the government and Peru LNG should be renegotiating all aspects of the contract, including the royalties formula.

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.

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