Malvinas: Corners Cut in Corrosion Prevention

In a piece called "Camisea: complicidades y negligencias," reporter, Herbert Mujica Rojas, brings to light Report No. 080-2005-CR/JVR from May 2005, to Peru's Congressional Committee for Fiscalización y Contraloría. The commission found evidence that the consortium Sade Skanska Latintecna JJC (today known as Skanska Peru) did not comply with technical specifications for corrosion prevention in the high temperature pipelines for the Camisea Gas Project and that this was known by Plus Petrol. OSINERG aknowledged the claim made by Skanska subcontractor, Eldaco SAC, the company hired to carry-out Cathodic protection of the high temperature pipelines in Las Malvinas.

The Commission report concludes that OSINERG knew this when it issued a report distorting and hiding the truth by referring to out-of-date Technical Standards when it said that it had detected no violations with respect to the security of the installations. It also accuses the Director General for Hydrocarbons and the Ministry of Energy and Mines of negligence in making claims about the project that contradicted the evidence.

Apparently, Skanska was responsible for building the Malvinas plant, where the gas from the San Martin and Pagoreni gas fields are collected, separated, and sent through the pipeline. Malvinas has the capacity to process 440 million cubic feet of natural gas and 30 thousand barrels of gas condensate each day. Skanska subcontracted Eldaco to apply cathodic protection to pipes that handle high temperature gas (>600ºC). The technical specifications of the treatment were to apply one layer of inorganic zinc and a second layer of silicone to the pipes, both necessary to prevent premature corrosion of the pipes and explosion of the volatile contents. Eldaco claims that Skanska, running behind in completion of the plant, cut corners and ordered the subcontractor to only apply the zinc coating, thus violating project specs. An Eldaco manager provides an account of this in the comments of this article in Servindi.

Camisea II: Hunt Oil May Build Second Pipeline in Amazon

Since October, we have been hearing diverse accounts that Peru LNG - the consortium led by Hunt Oil (US) and including SK Corporation (South Korea) and Repsol YPF (Spain) is considering building a second pipeline originating from the Las Malvinas facility in the Lower Urubamba region to feed its LNG plant in Pampa Melchorita with gas from Block 56. According to the Peru LNG's website, and the InterAmerican Development Bank (IDB), which is considering financing the project, the second pipeline was supposed to be built only from the coast to the edge of the jungle in Ayacucho. The reasoning has always been that constructing a new pipeline in the Amazon jungle would cause additional environmental damage to an extremely sensitive region. The original Camisea gas pipeline was supposedly sized large enough in anticipation of the additional gas from Block 56.

Now, however, Hunt is looking seriously at the possibility of constructing a second pipeline in the Amazon. Peru's Ministry of Energy and Mines (MEM) and its natural resource agency (INRENA) held consultations with local organizations in Quillabamba in November about the proposed second pipeline. In late November, a senior official with MEM told me that a second pipeline in the Amazon was in the planning and that it was needed because Peru's internal demand for gas has far exceeded expectations. This argument does not make much sense because the new pipeline would be build by Peru LNG to feed their LNG export facility. Besides, according to El Comercio, Camisea operator, Pluspetrol has not managed to offer gas at a price that has been attractive to industry. In a recent interview with Reuters, PeruPetro President, Cesar Gutierrez said, "The conversion to gas in industry has been limited and the conversion for domestic use is almost nil."

A more likely reason why Hunt is looking into the second pipeline is that Peru LNG could not come to agreement with TGP over the cost of transporting gas through the existing pipeline. Quality concerns with the pipeline may be another factor.

In December, I spoke with Lelis Rivera, Director of CEDIA, who has worked in the Upper and Lower Urubamba for three decades. He predicts that a second pipeline in the Amazon could not be routed alongside the existing liquid and gas pipelines. The existing pipelines were built along steep ridgelines and subsequent erosion has left little room to add another pipe. In some places, erosion of the ridgeline has been so bad that it has exposed the pipeline.

If Hunt does decide to build a second pipeline in the Amazon, the impacts on indigenous communities and the ecosystem will be as extreme. In a 2003 report on the construction of the first pipeline, Global Village Engineers Global Village Engineers estimated that the clearing and exposure of the right-of-way in the Amazon caused as much as 100 tons of soil and vegetation per meter of pipeline eroding into sensitive aquatic habitat. This left local indigenous communities without clean water or fish to eat.

The Camisea Chronicles

Check out Indian Country Today's recent three-part series on the Camisea Project. Reporter Lisa Garrigues visited communities in the Upper and Lower Urubamba as well as Quillabamba and reports on the conditions in the Machiguenga, Yine, and Quechua communities.

Garrigues offers an in-depth report on the changes in health, nutrition and culture in indigenous communities since the project began.

Here's a taste from the first installment on December 18, 2006:

Dr. Meliton Concha, director of indigenous health for the Quillabamba region, attributed the deterioration of Machiguenga health directly to dietary changes brought on by gas company activities. ''Before, there were fish and birds in abundance. Now the rivers are impoverished.''

Ciro Miranda, of the nongovernmental organization CEDIA, said the money negotiated in river access deals with Pluspetrol for three-year river exploration rights, which can range from $10,000 to $89,000, is minimal for the needs of the communities. Pluspetrol requires that the community present a project to them before they will disburse the funds. The projects don't always immediately alleviate malnutrition.

The series discusses some of the cultural impacts on the Machiguenga communities:

The buzz of helicopters, the churning waters of transport boats, the gas leaks that caused fish to die and skin to burn have been continual reminders in this territory that was once exclusive to the Machiguenga and other peoples.

Part 2 mentions health problems that have intensified since the project began including respiratory disease, diarrhea and syphilis.

In Part 3 of the series, Garrigues writes about what the government and companies have done to silence public criticism of the project including: cutting the budget of the Defensoria del Pueblo and thus forcing it to close it's office in Quillabamba; paying off media to slant coverage of the project; and shutting down a local television station that ran an investigative story about the project.

Photo by Adam M. Goldstein

E-Tech Questions TGP's Latest Pipeline Report

Peru's news daily, La Primera, has an interview with E-Tech International engineer, Bill Powers who shares his skepticism of TGP's latest report on the status of the Camisea Pipeline. He accuses TGP of placing the blame for multiple pipeline spills on mother nature while having not taken the time to adequately control erosion during pipeline construction. He also says that TGP's "intelligent pigging" tests are not capable of detecting the fundamental problem of substandard welding - a problem that requires radiography to identify.

Power's also questioned how the firm Germanisher Lloyd, which has been contracted by the Peruvian government to perform a technical audit of the pipeline, would be able to carry out a proper field assessment during the height of the rainy season in the Amazon.

Rigzone reports that TGP will invest an additional $85 million in the pipeline in 2007. It quotes TGP General Manager, Ricardo Ferreiro, as saying that "The pipeline is in perfect condition" and that their testing has found only 30 small scratches or dents in the pipeline.

Peru's New Petroleum Concession Map Covers Most of Amazon

Perupetro SA, Peru's state company responsible for promoting hydrocarbon exploration and development recently released a new map showing existing and planned concession blocks. The new map shows a number of new areas of the Peruvian Amazon now open for oil and gas exploration including the Sierra del Divisor Reserve Zone that borders Brazil. The portion of Peru's 67 million hectares of Amazon rainforest that is slated for oil exploration now exceeds the 50% reported on December 4, 2006 by the Environmental News Service.

According to Rigzone, Perupetro signed a record 16 contracts with private companies for oil and gas exploration and exploitation in 2006 and is putting another 18 on the auction block in 2007, which it will promote in at a roadshow in Houston this month.