Camisea Consortium to Invest US$500mn in Block 56

Argentine oil company Pluspetrol and its partners in the upstream Camisea natural gas project plan to invest US$500mn to explore and develop block 56 in the Amazon region, newspaper El Cronista quoted Pluspetrol's Peru CEO Norberto Benito as saying.

The investment is "an estimate, but it's in that order," a spokesperson for Peru's state investment company Perupetro told BNamericas.

Pluspetrol expects to sign an exploration and production contract with Perupetro in the next three weeks, once President Alejandro Toledo and the energy and finance ministries approve the contract.

Three weeks "is a good estimate, but it depends on the ministries," the Perupetro spokesperson said. "We should do it quickly because these are important investments and it can't be treated lake any [ordinary] contract," the spokesperson said.

After signing the contract, Pluspetrol would begin a social and environmental impact study of the block, which could be presented to authorities by year-end, Benito said.

The block is in an environmentally sensitive area near the existing block 88 and so the study must be "very detailed and well done, especially with the greater requirements from international banks for financing," the spokesperson said.

Pluspetrol expects the study to be approved by July 2005. "From there we would begin work in the field, the commitment is to drill at least one well in the first two years of the contract," Benito said. In the following stage, which is 36 months, the consortium's minimum work program is to drill four wells and build a new gas processing plant or expand the capacity of its Malvinas plant, located 25km from the six wells the consortium has already drilled on block 88.

Two wells have already been drilled on block 56. The latest, drilled by Anglo-Dutch company Shell (NYSE: SC) in 1998, discovered the Pangoreni field that reportedly has some 3 trillion cubic feet of gas reserves, the spokesperson said.

The Camisea consortium agreed in June to pay a royalty of 38% on gas produced from block 56 when the Henry Hub natural gas price is above US$4/mBTU and a 30% royalty when the price falls below that level. The price is currently about US$7/mBTU. The consortium previously agreed to pay a flat 37.24% royalty on its existing block 88, but that was because of the circumstances of the public tender for the block. A variable royalty based on price is more usual in Peru.

Camisea is scheduled to start shipping gas to Lima on August 9 and liquefied natural gas (LNG) exports could start in 2007. The Peru LNG consortium, led by US company Hunt Oil, plans to process the gas from block 56 into LNG for export to Mexico. Hunt Oil has a preliminary agreement to sell the LNG to Belgian company Tractebel. Peru's government stands to receive US$800mn annually from LNG exports.

Argentina's Pluspetrol leads the Camisea upstream consortium with a 26% stake, while Hunt Oil holds 36%. The other consortium members are Argentina's Tecpetrol (10%), Algeria's Sonatrach (10%) and South Korea's SK Corporation (18%).

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