CNPC has 'good news' for Peru's GSP: minister

Friday, September 23, 2016

China National Petroleum Corporation (CNPC) is expected to announce "good news" for Peru's US$5.5bn southern natural gas pipeline by November, energy and mines minister Gonzalo Tamayo said.

CNPC is expected to report commercial reserves at its block 58 gas field in the southeastern Ucayali basin in the fourth quarter, Tamayo said. The block holds an estimated 2.3Tcf in probable reserves, according to the energy ministry (MEM).

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"There are indications that we have pretty good news regarding additional reserves for the southern Peruvian gas pipeline," Tamayo said at an event at the mining and energy lobby (SNMPE) in Lima. "By November, we shouldn't hear those voices claiming the pipeline won't have reserves for its development."

Tamayo added he was "optimistic" about an eventual change in the pipeline shareholders. Brazil's Odebrecht and Enagás of Spain won the bidding for the concession in June 2014, but Odebrecht is negotiating the sale of its stake with potential buyers including Spain's Ferrovial and a Sempra-Techint consortium, according to local media. Peru's Graña y Montero bought a 20% stake in the pipeline last year.

President Pedro-Pablo Kucysnki met with CNPC executives among other investors during a trip to China earlier this month, Tamayo said. Hydrocarbons analysts including former Petroperú CEO César Gutiérrez have expressed concern that the 1-Tcf of natural gas allocated by the Camisea fields the will be insufficient to supply projects in the southern part of the country.

The 1,085km, 600,000 Mcf/d pipeline, part of US$33bn in investment commitments in Peru's energy industry over the next decade, will seek to supply natural gas to two 500MW power plants, local industry and petrochemical projects.

Camisea gas pipeline operator Transportadora de Gas del Perú (TGP) this month inaugurated an expansion of its conduit to 920,000b/d and is already operating at 80% of capacity.

Talks are ongoing with the Camisea consortium, Peru LNG and Mexico's federal electricity commission (CFE) to renegotiate Peru's natural gas supply contract due to the low royalties Peru is receiving, Tamayo added. President Kuczynski is also expected to meet for talks with Mexican President Enrique Peña Nieto in Cartagena, Colombia, he said.

"It's not in our interest to continue exporting to Mexico. That means increasing our position towards the Japanese or European markets, because there are more profitable alternatives than the Mexican market," Tamayo told reporters at the event. "The conditions to make contract renegotiations more viable are better now because there are gas pipelines being built from the US to Mexico which could substitute part of Peru's exports."

Peru's oil and gas export revenue halved to US$2.3bn last year due to slumping prices, according to the central bank.