The Peruvian Pipeline of International Discord

By Jim Lobe and - - Reprint | | Print |

WASHINGTON, Aug 11 2003 (IPS) - The controversial Camisea gas pipeline does not yet have the backing of the Inter-American Development Bank, but construction, which faces strong opposition from environmental groups, will go on. A complicated scenario of clashing interests has frozen Inter-American Development Bank (IDB) assistance for the controversial Peruvian natural gas pipeline, which crosses the Amazon jungle. Although 60 percent of the construction is already completed.

In decisions coming two weeks in a row the IDB has put off until at least the end of August an executive board vote on whether to provide 75 million dollars for the controversial 1.6-billion-dollar Camisea pipeline project, aimed at exploiting reserves of 368 million cubic meters of natural gas.

The decision to delay the vote came at the request of a key member of the IDB, the United States, which reportedly has been undecided on the loan.

The U.S. government's Export-Import Bank (Ex-Im) also put off its consideration of another 200-million dollars in support for the project.

Contractors Pluspetrol, of Argentina, Hunt Oil, of the United States, Tractebel, of Belgium, South Korea's SK and Peru's Graña y Montero reacted by assuring that construction, already 60 percent complete, will be finished with or without the IDB loan.

“We'll look to other credit sources. It will increase the project costs, but work will not be postponed. Natural gas will be arriving in Paracas in August of next year,” Ernesto Graña, executive at the Peruvian construction firm bearing his name, said last week.

Stretching just over 500 km between the Camisea petroleum fields, in the south-central jungle, and the western Paracas Bay on the Pacific, the gas pipeline has met with loud opposition from environmentalists.

Construction of the pipeline and the cryogenic and gas liquefying plants get negative marks on potential environmental impacts, particularly on the vulnerable Paracas Bay.

The delays came in the wake of a major campaign by a host of Peruvian and international non-governmental organizations (NGOs) against public financing of the project.

Their pressure tactics, which have included intensive lobbying of senior U.S. Treasury and IDB officials, appears to have moved the administration of President George W. Bush from supporting the project to at least abstaining on the question.

Washington is under pressure from the other side as well. Hunt Oil has close ties to the administration. Its chief executive, Ray L. Hunt, was a major contributor and fund-raiser for Bush's presidential campaign and also sits on the board of directors of the Halliburton firm, whose chief executive until 2000 was Vice-President Dick Cheney.

Halliburton is considered the ''top candidate'' to build the billion-dollar gas liquefying plant near Paracas, according to the Washington Post newspaper.

Thirteen U.S. senators have signed a letter to Treasury Secretary John Snow and the head of Ex-Im calling for a delay in the vote to allow more complete reviews.

''We applaud the decisions by Ex-Im and IDB to delay consideration of Camisea'', said a statement issued by a coalition of NGOs: Amazon Watch, Friends of the Earth, Bank Information Center, Institute for Policy Studies, and Environmental Defense.

''These decisions send a clear message that the Camisea project as it currently stands is fundamentally flawed,'' the group said.

But the IDB has not hidden its desire to be part of the Peruvian megaproject underway, arguing that it has the power to condition its assistance on compliance with environmental and social standards.

The Bank will make the project better “and encourage the companies (implementing the project) to better mitigate its impact,'' IDB spokesman Daniel Drosdoff told Tierramérica.

But he said the earliest the Board is likely to vote on the project is Aug. 27, and it remains unclear whether Washington will have made up its mind by then.

The construction plans for gas liquefying plants include one immediately adjacent to the Paracas National Reserve, one of the most important ecosystems in the Americas as it is home to extremely rare animal species, including green sea turtles, Humboldt penguins and other water birds.

“The four well where natural gas is to be extracted are on a nature reserve, while the liquefying plant is next to the Paracas, and should be relocated elsewhere,” Liliana Miranda, Peruvian activist with Cities Forum for Life, told Tierramérica.

Cathy Ross, coordinator in Lima for the humanitarian group Oxfam Americas, said her organization is not opposed to the project per se, but that “oversight should be entrusted to an independent entity, not to the Ministry of Energy and Mines.”

On the Nahua-Kugapkakori Reserve, where nearly 75 percent of the project's gas-extraction operations are located, several hundred indigenous peoples avoid or reject contact with outsiders and lack immunity to common diseases.

In a letter to IDB chief Enrique Iglesias earlier this year, the NGOs charged that the project's contracting firms were ''forcibly contacting groups living in voluntary isolation'' in violation of internationally recognized rights of indigenous peoples and may be responsible for reports of steeply rising death rates among Nanti children.

In their statement, the NGOs called on the Peruvian government to consult more closely with civil society and affected communities and “push back deadlines for project completion.”

But Minister of Energy and Mining Hans Flury expressed confidence that investors would find other credit sources and issued assurances that the accident prevention measures in place are sufficient.

In Washington, there is a different view of things.

Earlier this year, the U.S. Treasury itself reported that IDB involvement in the project risked ''sending a signal that project sponsors can bring poorly designed projects to (international financial institutions) too late in the process'' to allow for changes.

And the U.S. Agency for International Development (USAID) sent its own recommendation to the Treasury to oppose the project on the grounds that the environmental reviews failed to meet the standards required by U.S. law.