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FINANCE: Shoddy Work Plagues Major Peru Gas Project

Emad Mekay

WASHINGTON, Feb 24 2006 (IPS) - A controversial gas pipeline in Peru touted by its financial backers as a global development model is marred by shoddy construction work that has damaged the region’s fragile ecosystems and harmed the local indigenous people, according to an independent audit to be released next week.

Environmental and watchdog groups seized on the findings of the investigation by E-Tech International, a California-based engineering and environmental consultancy firm, and warned the Inter-American Development Bank (IDB), the main public lender to the Camisea Natural Gas Project, to carefully vet any future funding for the project.

The Camisea project in the Peruvian Amazon would bring 11 trillion cubic feet of natural gas and more than 600 million barrels of liquid petroleum gas (LPG) to homes and industries in the region.

The 1.6-billion-dollar project, which carries gas 1,100 kilometres across the Andes mountains to Lima and a new liquefied natural gas terminal on Peru’s Pacific coast, is being implemented in phases by a consortium of private and state-owned companies led by the Texas-based Hunt Oil and Argentina’s Pluspetrol.

Camisea is globally renowned as a biodiversity hotspot. It is also home to up to 1,000 indigenous peoples who have little contact with the outside world, and to 7,000 traditional Machiguenga people.

The audit examined the causes of four natural gas pipeline ruptures during the first 15 months of operation of the project. It found that the consortium building the project was in such a rush to finish the construction in order to avoid a 90-million-dollar a day penalty that it did shoddy building work that has left the pipeline at risk of ruptures and possible further breaks.

“The consequence of the rush to complete the project was a series of omissions and irregularities during construction that violated standard pipeline construction practices and Peruvian regulations,” according to the executive summary of the report, which was made available to IPS.

According to the technical investigation, the ruptures of natural gas liquids occurred for a variety for reasons, including inadequate welds, poor inspection of welds, corrosion of the piping, and negligent soil stabilisation and re-vegetation work along the pipeline route.

The investigation also discovered that at least 40 percent of the pipe used was left over from other pipeline projects and suffered from severe corrosion.

The findings contradict the rationale of why the project, despite persistent objections from advocacy groups that feared irreparable damage to the sensitive area, still received funding from the IDB, one of the few public lenders funded by governments specialising in loans to Latin American nations.

It concludes that these failings have led to grave environmental damage with serious consequences for local indigenous communities in one of the most remote and bio-diverse areas of the Amazon rainforest.

The full report will be released on Monday to coincide with the IDB’s semi-annual public consultations on the project in Washington. Peruvian and international civil society organisations like Oxfam America, Environmental Defence and the World Wildlife Fund (WWF) say they plan to challenge the IDB at the meeting over its refusal to enforce quality controls.

The Washington-based IDB has approved 75 million dollars in direct loans and is considering further loans for second phase of the pipeline.

When it first signaled its interest in lending to the project in 2002, the bank marketed its backing on the grounds that the project will be “a model for environmentally and socially responsible infrastructure development in Latin America, the Caribbean and, by extension and example, elsewhere throughout the world”.

The IDB has maintained that it assumed rigorous monitoring of the environmental and social consequences of the entire project. It defended the investment by saying that it subjected the project to a series of important environmental and social development and protection conditions.

But the findings of the report prove that that project suffers from sloppy on-the-ground oversight that does not augur well for the future involvement of the IDB, green groups say.

“We’ve never had anything that was as clear cut and specific in terms of what’s happening as this. From my perspective, this has been clear all along. But now this is the clearest proof we have today about at least some of the things that were done wrong,” said Aaron Goldzimer, a social scientist with the Washington-based Environmental Defence and a long-time observer of the project.

Other activists said the report showed that the IDB was asleep at the wheel.

“All of this happened under the nose of the IDB who was basically unable to really have meaningful loan conditions and quality control assurances. They put them on paper, but obviously those things didn’t have the effect that was intended,” said Atossa Soltani, executive director of Amazon Watch.

“There were a lot of layers of monitoring but those layers were grossly inadequate because they didn’t catch huge problems that are happening now, and of course the report shows they still exist,” she said.

Soltani said the findings of the E-Tech International report give new life to previous calls for a comprehensive independent audit of the pipeline and a freeze on future IDB funding until the irregularities are remedied.