Does It Make Sense to Export Camisea Gas?

With the IDB on the verge this week to make a decision to finance Camisea II, the export phase of the Camisea project, aka Peru LNG, an article in today's El Comercio reports that it could be a grave economic error for Peru to export its gas. According to an analysis by Glen Jenkins of Environmental Defense, at current oil prices, it would be more cost effective for Peru to secure its internal hydrocarbon demand for the next 33 years than to export the gas and have to import fuel in the future. In other words, Peru is paying a high opportunity cost by exporting fuel that it will eventually need.

The Camisea blocks 88 and 56 together contain an estimate 10.9 trillion cubic feet of gas. Of this, 4.2 trillion TCF is destined for export by Peru LNG. The Peruvian Ministry of Energy and Mines calculates Peru's future demand for gas to be 6.6 TCF and a large portion of the energy, industrial, and transportation sectors are making costly conversions to function on gas. The initial contracts for the exploitation of the Camisea gas required that export would be permitted only if domestic demand was permanently assured for a 20-year outlook, however this provision was conveniently changed to a fixed 20-year period (2005-2025) during a renegotiation between the Toledo administration and Pluspetrol. Now the Peruvian government's answer to meeting the future domestic demand for gas is simple if uncertain: discover more.

With over a billion in public financing for Camisea II pending from the IDB, IFC, and ExIm Bank, it is clear that the real beneficiary will be Hunt Oil which controls 50% of Peru LNG. What is less clear is how the project will ultimately benefit the Peruvian economy.

How Not to Contact Isolated Peoples: Repsol and Barrett Take a Page from Camisea

Survival International reports that the oil companies Barrett Resources (US) and Repsol YPF (Spain), have instructed their oil workers to shout through megaphones in the event that they come across uncontacted tribes in the Peruvian Amazon. Both companies have leased exploration blocks in regions where indigenous peoples are living in voluntary isolation. Barrett is operating in Block 67 on the border with Ecuador. Repsol operates the neighboring Block 39 as well as Block 57 in the Lower Urubamba. (It also has an indirect role in Camisea Blocks 88 and 56).

The "Megaphone Policy" for dealing with isolated indigenous peoples is remarkably similar to the Program for Protection and Defense of Voluntarily Isolated Peoples in the Nahua-Kugapari Reserve that was developed for Block 88 by Peru's Technical Coordinating Group for Camisea (GTCI) and the now defunct National Commission of Andean Amazonian and Afroperuvian Peoples (CONAPA). A product of the IDB's $5 million public sector institutional strengthening loan to the Peruvian government, the Program was thoroughly criticized by indigenous peoples' and human rights organizations, although never improved.

The Program, developed in 2003, advocates the use of megaphones, whistles, and flare guns (p. 75) if workers come across native peoples. Even the odd phrases that Barrett Oil workers are instructed to somehow communicate to people who do not understand their language are lifted verbatim from the Camisea Program:

‘How many days (moons or suns) have you walked for?’, ‘We are people just like you’, ‘Is something disturbing you?’ and ‘We haven’t come here to look for women, we have our own women in our own village.’(pp. 88 and 91)

Though severely lacking in advice on such matters as how to deal with a disease epidemic among an immunologically vulnerable population, the Program does not overlook the most obvious question one might ask of indigenous Amazonians who have just stumbled across an uninvited industrial project in their territory: "Is there something bothering you?" -p. 91.

The IDB deserves some blame for accepting this sort of hack contingency planning as satisfying its loan conditions for the Camisea project. Instead of strengthening Peru's policies to protect isolated peoples from contact by oil and gas projects, it has supported the creation of a set of irresponsible standards that are now being adopted by other companies and used as further justification for invading these peoples' lands.

New Report Finds Camisea Fails IDB and IFC Standards

The September 2007 report, Holding the IDB and IFC to account on Camisea II, is available for download from Amazon Watch. The report, by anthropologist, Tom Griffiths, highlights some of the major environmental and social problems of Camisea I and II and concludes that the Camisea consortium's community engagement in Block 56 has violated international standards on protecting the rights of indigenous peoples and fails to the meet the performance standards of the InterAmerican Development Bank (IDB) and the World Bank’s International Finance Corporation (IFC), both of which currently considering financing Camisea II.

Among the problems with Camisea II outlined in the report are:
1) A flawed and deficient Environmental Impact Assessment (EIA) for operations in Block 56.
2) A community consultation process on the Block 56 EIA that threatened confused and dissatisfied communities into signing their approval.
3) Evidence that prior consent and prior consultation rights were not fully respected by the Ministry of Energy and Mines and Perupetro when it sold exploitation rights to Block 56, questioning the legality of the sale.
4) Failure to address potential impacts of Block 56 exploration and development on isolated indigenous peoples.

The report states that the IDB must delay its decision on financing Camisea II until it first addressed project non-compliance issues with respect to its financing of Camisea I and ensure that ascertain that the project fully complies with IDB policies, including protections for indigenous peoples’ established under ILO Convention 169 and the Inter-American human rights system.

It urges the IFC to include the “associated facilities” of Blocks 56 and 88 in its due diligence; conduct its own social and environmental audit as required under its Performance Standards; and ensure public consultation in Peru and internationally before proceeding with the project.

This is a very good document, in particular for understanding how indigenous communities were railroaded into signing off on the Block 56 EIA in early 2005. Good work, Tom.

Department of Propaganda: Energy Project Saves Rainforest

Earlier this month, the Latin Business Chronicle published an article titled, Peru Energy Project Saves Rainforest, which credits the Camisea Project with saving 1.5 million hectares of Peruvian rainforest. The article, written by the InterAmerican Development Bank's Roger Hamilton, is reprinted from the IDB's own IDBAmerica magazine. In the article, a wide-eyed development-bureaucrat-turned-rainforest-explorer, IDB's Joseph Milewski, points to a map made by CEDIA (Center for Development of Indigenous Amazonians) showing the extensive network of reserves, protected areas, and indigenous territories that CEDIA, the local communities, and other non-governmental organizations fought for years to establish - and takes credit for it all.

The inaccuracies of this article could be written off as lousy journalism if they were not so offensive to the many dedicated people who have literally protested the IDB and the Camisea companies in order to get any protection whatsoever for the Amazon.

Hamilton writes:

Today, largely as the result of Camisea, vast areas have been designated as parks and reserves, giving the indigenous peoples of the Lower Urubamba an unprecedented guarantee that they will be able to make their own decisions on how to safeguard their environment and protect their cultural identity in the years to come.

...a large number of indigenous communities occupy land that has been demarcated and titled, most of which lies along the Urubamba River and its tributaries. Along the river’s main stem, patches of land belong to settlers who also have been granted titles.

In fact, the project has titled a whopping total of zero indigenous territories along the Urubamba River and its tributaries. All of the titling of indigenous communities was done long before the presence of the Camisea consortia and the IDB and was carried out by groups like CEDIA and Comaru with support from Oxfam America and others.

The closest the project has gotten to titling indigenous communities in the region was commissioning a diagnostic study (in which CEDIA participated) of the land tenure along the pipeline route. This was in part because some 150 former TGP workers had invaded the territory of indigenous peoples in the Mantalo River watershed. That study identified at least seven indigenous communities in the Upper Urubamba that needed titling as well as thousands of individual campesino titles that needed to be formalized. So far, 80% of the campesino lands have been addressed, while not a single indigenous community has been titled.

All of the protected areas that the article credits the project with creating: Otishi National Park, the Machiguegna and Ashaninka Communal Reserves, and the Machiguenga Sanctuary, were planned and delineated long before the project. The IDB did give a $5 million institutional strengthening loan to the Peruvian government prior to project financing, but the agency created with this money, the GTCI (Grupo Técnico de Coordinación Interinstitucional), only paid for two consultation workshops during the process of declaring the protected areas. All of the technical work of georeferencing, scientific research, and biological inventories were carried out by NGO's including CEDIA and the Chicago Field Musuem, which together invested 30 times the amount that the IDB contributed to the process.

Hamilton also mentions the Nahua Kugapakori Nanti Reserve for indigenous peoples living in voluntary isolation and claims that the IDB gave it a "solid legal standing and a real measure of protection." In fact, indigenous organizations and activities have long criticized the IDB for financing a project working in this reserve (created in 1990) because of the risk it poses to the lives of indigenous peoples living in voluntary isolation. To assuage critics, the IDB and the Toledo administration quietly passed new legislation in 2005, changing jurisdiction of the reserve (which already existed) and declaring the indigenous residents as wards of the state. Today, the project is in the process of drilling dozens of wells in the Reserve, illegal logging continues unabated, and most of the recently contacted residents are concentrated in settlements along the Camisea River, confined by the project to hunt, gather, and fish in a much reduced territory.

Sadly, the IDB's $5 million investment in the Peruvian government has left virtually nothing to show for itself except for a handful of workshops, weighty "diagnostic" documents, and a shiny, well-outfitted GTCI office in the basement of the Ministry of Energy and Mines. It is no wonder then that their publicists have to instead take credit for the years of struggle and hard work of local communities and organizations. Meanwhile, the project continues to cause damage to the Amazon, its protected areas, and indigenous communities.

Thanks to Lelis Rivera for his comments.
Photo: Ian Gary

Congressional Hearing Highlights Environmental Impacts of Camisea

On June 4th, 2007 a hearing was held in the Peruvian Congress on "Camisea Gas and the Development of the Affected Communities. Presenters included the mayors of Pisco and Anco-La Mar as well as Congressional representatives from the regions of Huancavelica and Ayacucho. Wílder Manyavilca, Mayor of the province of Anco-La Mar (Ayacucho) described the damage to forests, contamination of water and medicinal plants, and the loss of agricultural activity caused by the project. He asked for a fund to compensate agriculturalists for the loss of flora and fauna. A recent study estimated that socio-environmental impacts of the project in Anco-La Mar alone were 39,062,885 Nuevo Soles (US$ 12.3 m).

Representatives from Pisco stated that the project had caused environmental damage in Paracas Bay and feared an increase in problems as the fractionation plant is expanded. The demanded a halt to all Camisea II activities. Pluspetrol responded in La Republica that Paracas Bay is not contaminated, citing a monitoring report of ProParacas which found water quality and biodiversity to be within "normal parameters."

Vice Minister of Energy, Pedro Gamio announced that the government had met 70% of its 21 commitments under the IDB Program for Institutional Strengthening and Support for Environmental and Social Management which will end in August.

Article on the hearing in La Republica.

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.

Peruvian Comission to Evaluate Compliance with IDB Loan Conditions

An October 27 Ministerial Resolution has created a multi-sectoral committee reporting to the Ministry of Energy and Mines (MEM) in order to ensure compliance with the environmental and social conditions of the InterAmerican Development Bank (IDB) loan, and to determine possible changes in the government's management of the project. The commission will be comprised of MEM, the Peruvian Finance Ministry, Ministry of Agriculture, Ministry of Health, INDEPA (institute for indigenous and afroperuvians), National Institute for Natural Resources (INRENA), the National Comission of Environment (CONAM), and the Supervisory Agency for Energy (OSINERG). The Camisea coordinating body, GTCI, will be the secretariat. Notably, Peru's Public Ombudsperon (Defensoria del Pueblo) is not included, nor any civil society organizations.

The committee is tasked with developing and action plan that includes:
Improving the Camisea Fund, aka FOCAM;
Improving compensation and indemnity procedures for affected communities;
Improve legal access in relation to defense of protected areas and indigenous territorial reserves;
Increase the presence of the government in the project area in support of an integrated monitoring plan;
Support the Protection Plan for the Nahua Kugakapori Reserve for Indigenous Peoples living in voluntary isolation;
Implement mechanisms for participatory sustainable development in the Lower Urubamba valley;
Ensure adequate resources for protected areas;
Improve communication with civil society in the areas of influence of the project; and
Strengthen the function of PROPARACAS.

This committee is forming at the same time that the IDB is contracting ICF International to carry out its own four-month environmental and social audit of the Camisea project.

Préstamo para gas natural en duda

El financiamiento del Banco Interamericano de Desarrollo (BID) para el proyecto de exportación del gas natural licuado (LNG, por sus siglas en inglés) de Camisea estaría condicionado a los resultados de la auditoría a los ductos. Según informó el diario "Financial Times", el proyecto requiere US$400 millones del BID. El presidente de este organismo multilateral, Luis Alberto Moreno, recalcó que no han cerrado la posibilidad de otorgar el préstamo, aunque remarcó que sin la auditoría no se podrá continuar con la segunda fase. Fuente: El Comercio