An extensive natural gas discovery deepens China´s energy ties with Peru and reinforces the South American country´s midstream, power generation and petrochemical plans.
Chinese state-owned CNPC confirmed 3.9 trillion ft3 of gas and condensate reserves in four structures on block 58, boosting the country´s reserves by 27pc, Peru´s energy minister Gonzalo Tamayo announced yesterday.
"This is very good news for Peru and clearly shows that there are greater volumes of gas in the country," Tamayo said.
The southern block lies next to the extensive Camisea gas complex, which supplies the Peru LNG liquefaction plant on the coast south of Lima. CNPC took over the block last year from Brazil's Odebrecht and picked up exploration activities where Odebrecht left off.
CNPC is "going to move ahead and have confirmed reserves, which is a start. I think that they are going to find more," Peru´s president Pedro Pablo Kuczynski told Argus following a state visit by Chinese president Xi Jinping this week in which 18 bilateral agreements were signed.
Most of the gas produced in Peru comes from Camisea's blocks 88 and 56, with a combined 12.7 trillion ft3 of reserves. Adjacent block 57, operated by Spain's Repsol, has 1.9 trillion ft3 of reserves.
CNPC is already Peru's largest crude producer as operator of 10,800 b/d block 10 and 3,200 b/d block 6/7 on the northern coast, and as a partner with Argentina's Pluspetrol on 4,550 b/d block 8 in the northern jungle. Block 58 would be the Chinese company´s first foray into Peru´s more vigorous gas sector. The firm could not be reached for comment.
Kuczynski said the new gas discovery on block 58 underpins the development of a second gas pipeline in the south. The reserves "make the pipeline feasible from the point of view of supply," he said.
But Kuczynski acknowledged contractual disagreements over the 1,134km (680mi) southern gas pipeline project, which US firm Sempra and Argentina´s Techint had planned to complete by taking over Odebrecht´s 55pc stake.
Sempra said last night it had given up on the $6.5bn project.
Negotiations fell apart after the Peruvian government refused to scrap a standard anti-corruption clause in the contract. "The guys who are buying Odebrecht's part want the elimination of the anti-corruption clause. Well, this clause is in every PPP (public-private partnership) and concession that has been done in the last few years in Peru, so how could we possibly remove such a clause in the one project that has had questions about its origin? That's not going to happen, it's that simple," Kuczynski told Argus on 22 November before Sempra´s announcement issued last night.
The unraveling of the negotiations to complete the partially constructed line could open another opportunity for Beijing. Peru's economy and finance minister Alfredo Thorne said on 20 November that if problems persist with the project the Peruvian state could revoke the contract and re-tender the project, maybe as early as January. This scenario now looks feasible.
Downstream from the new gas discovery, Peru is hoping to develop petrochemical projects near new gas-based power stations. Peruvians authorities have previously floated the idea of adding a second train to the Peru LNG project or building a new liquefaction plant at the terminus of the new southern pipeline.
CNPC´s intentions appear to be broad. During the Asia-Pacific Economic Conference in Lima on 20 November, CNPC Chairman Wang Yilin met with Kuczynski and signed a memorandum of understanding with the energy and mines ministry to "step up joint efforts in E&P, refining, transportation and distribution infrastructure construction, natural gas transportation, gas chemicals, as well as R&D," CNPC said.
In the electricity sector, Lima is courting other Chinese companies to tap into the country´s estimated 60,000MW in potential hydroelectric capacity.
The first Chinese investment, a joint venture between China´s Three Gorges and Portugal's EdP, is the 206MW San Gaban 3 hydroelectric plant in southern Peru. Investment of close to $450mn will be financed by China Development Bank. The contract was published 22 November, the day after Xi's visit.
