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PPK talks about Peru's natural gas future
Pedro Pablo Kuczynski (Vidal Tarqui/Andina)
Translated and adapted by Nick Rosen
April 16, 2012
Former Minister of Finance and presidential candidate Pedro Pablo Kuczynski answered questions about the Southern Andean gas pipeline, the potential petrochemical cluster, and attracting investors.
How will the pipeline be supplied?
We do not know which lot (of Camisea) will supply the pipeline. It can’t be 88, because all that goes to Lima, Chilca, etc. It can’t be 56, as that goes to Melchorita for refraction. It must be 57 and 58 which are plots with Repsol and Petrobras.
But they have to prove the extent of the reserves to finance the pipeline ...
This is like the chicken and the egg. The reserves aren’t proven if there is no buyer, and the buyer does not buy if there are no proven reserves. The government must break the cycle by giving confidence that it will provide institutional support.
How does on ensure the supply and demand?
The solution to these problems would be the petrochemical cluster, because it would be a huge consumer. The world is in a semi-recession. It is not easy to launch a petrochemical project today, but if you look at ten years, the outlook is positive. Much of the petrochemical market may be in Peru itself.
Where would the cluster be located?
It could be in several places on the south coast, provided you have a good port. South of Ilo, there is a huge plot that can be reserved, but there are other sites, such as St. Nicholas, much further north. The Tacneños want it to be in Tacna, but making a port is more difficult. The most logical place would be Ilo.
What would it cost?
At least U.S. $ 15 billion at today's prices.
Who would make the investment?
There will be many manufacturers, but one will have to be the anchor. There has been talk of Braskem, a subsidiary of Odebrecht, who wants to build the pipeline, but the opportunity must also be given for American firms.
How long would the project last?
I would say to clear the way, two years. To build the pipeline, two to three years. And to build the petrochemical complex, which can be done at the same time as the pipeline, two or three years.
What is left to the government?
You have to push Petrobras and Repsol to increase exploration. They must make a credible estimate of the cost of the pipeline, which does not exist. It’s now thought to cost U.S. $ 4.5 billion, which is twice what was discussed two years ago. Nor is the pipeline route mapped out.
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Total coments: 2
Commented By: Martin
On: April 16, 2012. 5:45 pm
Until the wells are drilled and the gas reserves established - it is all talk. Why not let the marketplace work? Let the companies drill their wells and sell the gas into an open marketplace.
Commented By: JasonWSmithPhD
On: April 18, 2012. 2:28 am
Don Kuczynski is correct. If hit and miss capitalist investment has a place the modern oilfield and associated user-complex has long since ceased to be part of it. All the Seven Sisters plus Occidental and all the National Petrol Companies have ten and twenty year plans of integrated resource extraction and subsequent utilization. It is time for Peru to graduate from being soley an extraction nation to being a modern petrochemical manufacturing nation as well. That is where the money is to be made for the Peruvian nation. The job of the Government is to quickly put together the parts of the Plan and see that the financing is arranged. China can be a big help here. They have both the financial resources to assemble an investment group and the technical knowhow to assemble along with PetroPeru the subcontracting for drilling, pipelines, petrochemical end-users and export control. In the end this makes Peru a market for cheaper gas and oil and the recipient of ongoing inflows of foreign exchange. You approach oil and gas nowadays the same way you approach massive dam building as in Brazil and Paraguay or the Three Gorges in China.
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