The Inter-American Development Bank has delayed a decision on a controversial gas pipeline in Peru after failing to reach agreement about the environmental and social impact of the project.
The IDB board on Wednesday postponed a vote, at the request of its president, on whether to approve $135m in finance for the Camisea pipeline, which has drawn criticism from most of the environmental community.
The bank, recognising there were “environmental and social concerns” about the project, said the delay would “give the directors more time to decide”. But the bank is expected to approve the loan on August 6, although opposition from Jose Forquet, the US representative, may force it to attach stricter environmental conditions.
The delay represents a setback for the Peruvian government, which has been active in promoting the project, and signals growing caution on the part of the US towards the plans.
The $800m dual pipeline, which will carry natural gas 700km from the Camisea fields to Lima and liquids for export to a port south of the capital, is the largest energy project in the country and a development showcase for President Alejandro Toledo.
The government remains committed to feeding natural gas into Lima by next August. However, any hold-up on the $200m loan guarantees for Camisea by the US Export-Import Bank, which is also preparing to vote on the project, could delay completion of the second phase, which includes a fractionation and loading plant for exporting gas liquids from Pisco, 200km south of Lima, to the US and Mexico.
The project has been dogged by controversy because of its impact on indigenous tribes. It has been the target of attacks by Shining Path, the Maoist guerrilla group still active in the Andean highlands south-east of Lima. Last month, 70 pipeline workers were briefly taken hostage by an armed Shining Path band.
According to USAID, the official US government aid agency that is recommending the US oppose finance for the Camisea pipeline, the US vote rests ultimately with the Treasury. It is unclear, however, if the Treasury has instructed Mr Forquet to abstain or vote against the project.
A separate report commissioned by Ex-Im has recommended that the bank include more stringent environmental safeguards as a condition for the guarantees.
Critics of the pipeline have met senior US Treasury officials to make their case for a no vote at the IDB. They also called on the bank to postpone its vote because of the report by URS, which also advised the IDB. The report recommended that Ex-Im attach conditions to any financing.
The report said Pluspetrol, the Argentine developer in the Camisea consortium, which includes Texas-based Hunt Oil as the largest investor, was adhering to Peru’s environmental standards. But it added that there was a “lack of regulatory enforcement” in the country.
Some environmental groups have suggested that Ex-Im, whose board includes two Republicans and one Democrat, may be coming under political pressure from the White House to approve the project. Ray Hunt, chief executive of Hunt Oil, is a board member of Halliburton, the oil services company formerly run by vice-president Dick Cheney. He was also appointed by President George W. Bush to the Foreign Intelligence Advisory Board.
“Hunt Oil of Texas has a history of campaign contributions to President Bush,” said John Sohn of Friends of the Earth. “We hope that history is not clouding the Bush administration’s decisions on US taxpayer support of Camisea.”
Opponents of Camisea financing are also lobbying lawmakers because Congress must review Ex-Im’s decision.
