Washington – The Inter-American Development Bank is moving forward in assessing whether to provide a loan to Hunt Oil for the second phase of the Camisea natural gas project in Peru that would lead to a liquefaction project, even as the US government panned the bank’s decision Wednesday to grant financing for the first phase of the project.
“We are of the view that Camisea has not been a success,” Clay Lowery, assistant US Treasury Secretary, told the Senate Foreign Relations Committee. “There was a reason we voted against it (in 2003), and it looks like that decision was correct.” The US was the only member nation to withhold support of IADB funding for the first phase of Camisea, a $1.7-billion natural gas exploration, development, pipeline and export project that came online in August 2004. The US, through its Export-Import Bank, also declined to provide financing to the project, citing environmental concerns. Camisea’s first phase, which the IADB said has helped Peru reduce its energy import costs by $500 million a year, slash electric-generation costs and add $264 million in royalty payments to the government, has been marred by five pipeline ruptures and spills. Human rights groups also say revenues from the project have not gone to the people who need it most, claiming that local people are suffering, not benefiting, from the project.
“We think IADB still needs to work on Camisea 1,” Lowery told reporters after testifying to the committee. But he said the Bush administration has no position on the second phase of Camisea since it is still in its early stages. Dallas-based Hunt is the lead sponsor and 50% equity holder in Camisea 2, or Peru LNG, a $3.3-billion project to take natural gas produced from fields developed during the first phase of the Camisea project, liquefy it through a new LNG plant, and export it to markets in Mexico, Chile and North America. The project, which also involves a 250-mile gas pipeline expansion, is also owned by South Korea’s SK, with 30%, and Spain’s Repsol, with 20%.
Hunt has approached the IADB for a loan of up to $400 million to help jumpstart financing for the project. While the loan would be only a small part of the overall price tag, involvement by multilateral development banks greases the skids for private financing by giving the project’s environmental and social mitigation aspects the bank’s seal of approval. In Camisea’s first phase, IADB provided $75 million for construction of the pipeline. IADB and Hunt have been talking for several months about phase-two financing, and the bank is in the final stages of “ironing out the details” of a so called mandate letter, which would allow the IADB access to confidential company documents, Chris Sale, a bank spokeswoman, told Platts after the hearing. The Hunt documents, such as specific details about the project plans, its legal structure and environmental and social mitigation plans, would allow the IADB to conduct due diligence, a process that is expected to take “several months,” she said.
While Sale would not say when the mandate letter would be signed, she said it could be soon. “The (bank) feels strongly that it can have a positive effect on the project, and that this project can have a positive effect on the people of Peru.” Sale said. Jeanne Phillips, Hunt senior vice president for corporate affairs and international
relations, said that talks with IADB continue, and that the company has been meeting with non-governmental organizations and members of Congress this summer to discuss the project. “We absolutely want the support of the IADB and other multilateral development banks,” Phillips told Platts after the hearing. She said she hopes that the IADB would vote on financing for the project in the fall. But other sources have said the decision may not come until early next year, after Peru completes a study of the first phase of the project, including an investigation into the causes of the pipeline ruptures.
Hunt has not yet filed loan applications with the World Bank or the US Export-Import Bank, Phillips said, but it is considering such a move.
