PERU – Repsol YPF SA, Europe’s fifth-largest oil company, and U.S. closely-held Hunt Oil Co. began construction in Peru of a $2.2 billion plant that will export natural gas from the Andean nation to the U.S. and Mexico.
The liquefied natural gas plant is part of a project aiming to make Peru energy self-sufficient, create 35,000 jobs and add 0.7 percent to annual economic growth, according to the Energy Ministry. Construction is slated to finish in mid-2009.
Gas exports from the plant will provide the government with $200 million in annual tax income, President Alejandro Toledo said at the ground-breaking ceremony broadcast on Lima-based television station Canal N. The plant may help accelerate economic growth to more than 5 percent for a third year in 2006, according to the government.
“It will be an important driver for economic growth over the next four years,” Sebastian Briozzo, an analyst at credit rating company Standard & Poor’s, said in a telephone interview from New York.
Peru’s economy grew an estimated 6.3 percent in 2005, Peruvian Finance Minister Fernando Zavala said yesterday.
Dallas-based Hunt, Madrid-based Repsol and Seoul-based partner SK Corp. designed the export plant, the sole LNG plant on Latin America’s Pacific coast, because the $1.7 billion Camisea gas fields project was unable to line up enough domestic clients.
The three companies are also members of the group developing Camisea, which boosted Peru’s gas output by three quarters to 53 billion cubic feet last year.
‘Continuous’ Growth “Peru has shown it’s complying with the rules of the game and is guaranteeing the legal stability needed to post continuous economic growth,” Hunt’s chief executive in Peru, Carlos del Solar, said at the ceremony.
Repsol, which took a 20 percent stake in the project in June, aims to sell customers along the U.S. West Coast and Mexico 4 million tons of liquefied natural gas a year from the Pampa Melchorita plant, 140 kilometers (90 miles) south of Lima.
Repsol will invest $350 million in the project, which will buy 620 million cubic feet of gas from Camisea for 18 years from the date the terminal starts processing the fuel.
Camisea contains reserves of 13 trillion cubic feet of gas.
‘Financial Clout’ “Repsol is bringing some much-needed financial clout and LNG experience to the project,” Gareth Ellis, an Edinburgh-based analyst at Wood Mackenzie Consultants Ltd., said in an interview. “This is going to make Peru a major player in the gas market.” The project has been delayed by a lack of financing and the failure to sign up clients for the gas, say experts such as Cesar Gutierrez, an energy analyst at Lima-based consultant Utilities Peru.
“We’re buying the gas, so we’ll find a market,” Repsol’s president in Peru, Carlos Alfonsi, said in a Dec. 16 interview. “Mexico’s big enough to buy our gas.” Mexico plans to build as many as six LNG terminals in as many years to help diversify its gas imports away from the U.S. Repsol plans to build a receiving LNG terminal in Lazaro Cardenas in the Mexican state of Michoacan.
