Camisea Operator to Invest $85M in Pipelines

LIMA (Dow Jones)

Transportadora de Gas del Peru, or TGP, the company running Peru's Camisea natural gas and liquids pipelines, will invest $85 million in its pipeline system in 2007, the company's general manager said Thursday.

The investment will be "approximately $85 million and of that we estimate that $8 million will be for geotechnical work, although it depends on the impact of the rainy season," said Ricardo Ferreiro.

"You can rest assure that if more funds are needed they will be made available," he told reporters after a presentation.

TGP has a 33-year concession to transport gas and liquids from the Camisea gas fields, or block 88, in Peru's southeastern jungle region.

In 2006, the company carried out extensive work to safeguard its pipeline infrastructure in the wake of five different ruptures in the liquids pipeline system between mid-2004 when the project came onstream and March 2006.

In 2006, TGP spent $110 million and of that $60 million was specifically used to monitor the system and to fix any potential problems, said Ferreiro.

Among other things, it carried out an extensive evaluation of the entire system that included testing by small robots known as smart pigs that travel the length of the pipeline.

According to Ferreiro, the pigs tested 48,000 lengths of pipeline and there were only 30 faults, the majority small scratches or dents.

All of those problems have been dealt with, he said.

"The pipeline is in perfect condition," said Ferreiro.

The government is also carrying out its own audit of the pipeline system, and Ferreiro said he was confident that the results would be same.

The TGP official also said that the company is currently negotiating with Peru LNG, a joint venture led by U.S.-based Hunt Oil Co. with South Korea's SK Corp. and Repsol YPF.

The venture plans to export liquefied natural gas to Mexico beginning in 2010.

It will be supplied by block 56, which lies adjacent to Camisea's block 88.

According to Ferreiro, TGP is currently negotiating the rate that Peru LNG must pay to use the existing transport system.

The company also is interested in building the new stretch of pipeline required by the project.

The project will use the existing infrastructure in the jungle area but will require some expansion in the Andes and on the coast.

Previously, officials said that expansion could cost $500 million.

"We are in talks but first we are dealing with the rate," he said.

TGP is a consortium led by Techint's Tecgas NV and that also includes Hunt Oil, Pluspetrol Peru Corp. and other companies.

Copyright (c) 2006 Dow Jones & Company, Inc.