USAID Report to Congress Links PeruLNG to Camisea I

A report obtained by Oxfam America through the Freedom of Information Act submitted by USAID to Congress reveals that agency's concerns with the Camisea Natural Gas Project and links it directly to the development of PeruLNG aka Camisea II.

USAID must report on the project because US tax dollars contributed to the $75 million IDB loan granted to the downstream (pipeline) portion of the project.

Under the Pelosi Amendment (Section 1307 (a)(1) of the International Development and Finance Act of 1989), the EIA (Environmental Impact Assessment) for the fractionation plant and marine terminal were not completed and publicly available 120 days before the IDB's vote, thus USAID recommended to the Secretary of Treasury and US Executive Director on the IDB Board "not to vote in favor of the proposed Camisea Natural Gas Project."

USAID's analysis, "revealed substantial adverse environmental and social impacts involving biodiversity and indigenous peoples that needed to be remedied." It also found that not all of the IDB's loan conditions regarding environmental and social commitments of the project were fulfilled prior to financial closure on the loan.

The report describes the LNG export component of the project as including the construction and operation of an LNG liquefaction facility and marine export terminal in Pampa Melchorita on the coast, a 408 km, 34" diameter, pipeline extending from Chinquintirca, Ayacucho to the coastal plant (we now know that this new pipeline will most likely extend all the way to the Lower Urubamba in the Amazon), and the development of new gas wells in Block 56, adjacent to the Block 88. Six (or more?) wells are planned to tap the Pagoreni Reserves of 3.5 trillion cubic feet of gas in Block 56.

The proposed financing of the LNG export component is the following: $700 million from Export Credit Agencies, $400 million "A" loan and $400 million "B" loan from the IDB (the IDB signed a mandate letter in July 2006 formally beginning the project appraisal process), and $300 million from local capital markets. Project sponsors will contribute $1.6 billion.

According to its report to Congress, "USAID considers the LNG project as an expansion of the Camisea Natural Gas Project." This means that in considering loans to PeruLNG, the US government will revisit the environmental and social concerns raised in the first IDB Camisea loan and evaluate fulfillment of the conditions of that loan (something that the IDB has not done since June 2004).

Under the Pelosi Amendment, the US government's environmental assessment of the project must include associated and cumulative impacts, in this case the existing Camisea project including the pipeline and activities in Block 88.