In August 2004, Peru’s then-president, Alejandro Toledo, inaugurated the long-awaited Camisea project. Named for the river adjacent to the natural gas reserves now being piped more than 700 kilometers from the Peruvian Amazon Basin to Peru’s capital Lima, Camisea ushered in a new era for the nation. On the occasion of the project’s launch and arrival of natural gas to Lima, President Toledo proclaimed: “Thanks to Camisea, Peru will go from being an energy importer to a country that exports energy overseas.”
Politicians often make bold pronouncements whenever they inaugurate major infrastructure projects. However, in this case, and with the advantage of ten years of hindsight, it seems clear that President Toledo may have underestimated what Camisea would mean for Peru. And not just in economic terms, but also the critical lessons for energy projects, particularly with regards to balancing environmental and community elements.
It is hard to overstate the importance of Camisea. The project has completely revamped Peru’s energy matrix to one thirsting for natural gas. Indeed, the project provides all of the natural gas consumed in Lima and accounts for 50% of electric generation in the country.
Additionally, Camisea has insured that Peru’s hydrocarbon trade balance remains positive largely on the back of the natural gas liquids produced. More broadly,, the project has fostered investment of over $13 billion and boosted annual GDP growth by .25%.
This year marks the tenth anniversary of production from Camisea as well as the 31st anniversary of its discovery by Shell. It is important to celebrate this anniversary to underscore how the project has transitioned from a challenge to an opportunity and economic cornerstone for Peru. Former US Secretary of the Interior, Bruce Babbitt, has called it the best model there is in the developing world.
A consortium led by Argentine firm Pluspetrol was awarded a forty year concession in 2000 when the project began anew. The consortium overcame major logistical challenges on the path to bringing natural gas to Lima. In an effort to minimize environmental impacts, and as part of stringent requirements put in place by the project’s financiers led by the Inter-American Development Bank, no roads were built for the project.
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Instead, the project was developed as an “offshore on land” operation, that is an extractive project implemented as if it were at sea and with a minimal footprint. The project has used only 7% of the acreage available for development and has also supported creation of a national park and sanctuaries in the area. Constructing and placing the project in operation was done primarily using fluvial routes and helicopters to land an estimated 700,000 tons of equipment.
To date, the project maintains rigid control of access to the project site in order to safeguard the local environment and communities. Medical safeguards include a Medical Passport program that insures proper inoculations of those working on or visiting the distant operation.
The consortium and government have aimed to involve communities in the project’s development and operation. According to Pluspetrol, over 12,000 indigenous residents of the region participated in a wide range of consultative meetings and discussions. The project’s lenders have also placed important conditions on indigenous and community relations.
But the results and expectations have not been entirely met. Critics and local community leaders argue that the economic windfall of the project has not been properly directed back to the local area. There are ongoing needs for education and health care in the area surrounding the project. It appears clear that the consortium, but especially the Peruvian government, would do well to double down on their efforts to further manage social issues and enhance community relations.
In terms of the future, Camisea’s past is prologue: the project has unleashed massive demand for natural gas in the Andean nation, primarily for electric generation to sustain one of Latin America’s fastest growing economies. One estimate points to demand for natural gas almost doubling in the country’s power sector by 2024.
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But despite impressive impacts to date, there are challenges for Camisea and Peru’s natural gas potential more broadly. Beyond the huge need for improved relations with the local communities, the government is also striving to confront an infrastructure deficit. To sustain the gains of the last ten years, downstream infrastructure and pipelines must be a major focus, and the long-awaited Gasoducto de Sur project needs to be built.
A traditional tenth anniversary gift is tin. But this August the Peruvian government and Camisea consortium may wish to forego exchanging tin gifts and instead insure that Camisea steadily marches forward towards its silver and gold anniversaries.
By. Jeremy Martin
Jeremy Martin is the Energy Program Director at the Institute of the Americas, a think tank focused on Western Hemisphere Affairs based at the University of California, San Diego.