VZCZCXYZ0001
RR RUEHWEB

DE RUEHPE #1774/01 1371644
ZNR UUUUU ZZH
R 171644Z MAY 07
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 5498
INFO RUEHBO/AMEMBASSY BOGOTA 4662
RUEHBR/AMEMBASSY BRASILIA 7344
RUEHBU/AMEMBASSY BUENOS AIRES 2889
RUEHCV/AMEMBASSY CARACAS 0395
RUEHLP/AMEMBASSY LA PAZ MAY QUITO 1216
RUEHSG/AMEMBASSY SANTIAGO 1279
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC
RUMIAAA/USSOUTHCOM MIAMI FL
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHDC
RUEHBS/USEU BRUSSELS

UNCLAS LIMA 001774 
 
SIPDIS 
 
SIPDIS 
 
USEU FOR DCM MCKINLEY 
TREASURY FOR U/S TAYLOR, KKOZLOFF, MSHWARZMAN, AJEWELL 
STATE PASS TO EXIM MHASAN/SPARSONS 
ENERGY INFORMATION ADMINISTRATION FOR CHARLES ESSER 
DOE FOR GWARD/SBROWNE 
 
E.O. 12958:  N/A 
TAGS: ENRG ECON ETRD EAID SENV PE
SUBJECT: PERU LNG: NEW PIPE, BUT NO NEW JUNGLE PIPELINE 
 
REF: (A) 06 LIMA 3896 (B) Lima 3686 (C) Lima 742 
 
¶1. SUMMARY: Camisea gas transporter TGP and Peru LNG operator Hunt 
Oil agreed to a tariff for TGP to transport Peru LNG gas for the 
jungle portion of the shared gas pipeline. This agreement obviates 
any need that might have seemed present for a new gas pipeline to be 
laid in the environmentally and socially sensitive jungle section. 
Both companies will now move ahead with previous pipelines plans, 
with shared pumping stations and control. From the beginning, the 
designs of the Camisea and Peru LNG projects contemplated additional 
gas pipe for Peru LNG, from the mountains west to the coastal Peru 
LNG site.  There is no change in the plan for both projects to share 
the existing liquids pipeline.  END SUMMARY. 
 
BACKGROUND - DESIGN OF CAMISEA 
------------------------------ 
¶2.  As Reftels explain, the Camisea natural gas project was designed 
with eventual additional gas load in mind, whether from Peru LNG or 
development of other gas concessions in the vicinity of the Malvinas 
gas processing plant (in Block 58) and the San Martin and Cashiriari 
gas fields in Block 88.  The gas line was constructed with 32-inch 
diameter pipe for the portion from the separation plant in Malvinas 
to the start of the Andes Mountains; the size is greater than needed 
for the expected flow of Block 88, but is large enough for the gas 
from an additional concession blocks such as the adjacent Block 56 
from which the Peru LNG project will get its gas.  The more 
expensive pipe was used to avoid the engineering challenges, and 
environmental sensitivity associated with construction and operation 
of another gas pipeline in the unstable terrain of the Amazon jungle 
section.  The plan for the new extraction sites for Peru LNG has 
always contemplated piping to connect to the separation plant in 
Malvinas. 
 
¶3. At around km 212, the Andes Mountains create less environmental 
sensitivity and the Camisea pipe steps down to 18-inches, later 
reducing once more to 12-inch pipe in the relatively flat coastal 
desert.  The 18- and 12-inch gas pipe sections are not large enough 
to accommodate the increased gas volume from the Peru LNG (liguified 
natural gas) project; Peru LNG (operated by Hunt Oil) will need to 
build a separate, 34-inch pipeline from approximately km 212 to the 
Peru LNG plant site, about 80km north on the coast from the Camisea 
fractionation plant in Pisco.  Peru LNG's plan is to parallel the 
existing Camisea gas and liquids pipelines as much as possible; 
using the existing Camisea route will minimize environmental impact, 
engineering challenges and impacting local communities.  TGP will 
operate Peru LNG's pipeline out of its sophisticated remote sensing 
control center near Lima. 
 
¶4.  The liquids pipeline that now runs parallel to the gas pipeline 
to Pisco (near Pisco the gas pipeline cuts north to it terminus just 
south of Lima) will not change.  The Malvinas separation plant will 
expand to accept the Peru LNG product extracted from Lot 56,and will 
separate it into gas and gas liquids just as currently occurs with 
Camisea extraction.  The liquids pipeline flow will increase to 
accommodate the additional liquids, but no new pipeline will need to 
be built; additional processing structures will be built at the 
Pisco fractionation plant to process those additional liquids. 
 
SO WHAT IS NEW? 
--------------- 
¶5. Media reports recounted what appeared to be stalled negotiations 
between Peru LNG and Transportadora de Gas del Peru (TGP), the 
operator of the Camisea gas and liquids pipelines, over the tariff 
TGP would charge for transporting Peru LNG gas through the 32-inch 
jungle pipe.  Peru LNG held out the possibility that if negotiations 
failed, Peru LNG would have to build its own gas pipeline for the 
sensitive jungle portion.  The tariff deal was finalized by Hunt and 
TGP on March 22, so there will be no new pipeline in the jungle 
portion. 
 
¶6. Environmental impact assessment (EIA) processes are proceeding 
satisfactorily, according to the Environmental Division of the 
Ministry of Mines and Energy (MEM).  The EIA for the new gas 
pipeline was approved in September 2006.  New pipelines are under 
consideration to connect the Camisea gas pipeline to other cities in 
the Andes such as Ayacucho, La Oroya and Cuzco. 
 
¶6. A description of the new Peru LNG gas pipeline that has always 
been planned, along with a map, can be found at 
http://www.perulng.com/proj_pipeline.asp. 
A map of the existing Camisea pipelines can be found at 
http://mirror.perupetro.com.pe/exploracion01- e.asp. 
STRUBLE