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Environmental and social safeguards in place for Camisea

To assure protection of the ecologically fragile region where the production and processing plants of the Camisea natural gas project are being built in Peru, the IDB has established environmental and social requirements and monitoring and supervising the entire project, not just the pipeline the Bank is helping to finance.

The IDB's participation in the project has spurred positive measures that will make Paracas bay --where ships will load Camisea's natural gas liquid products-- cleaner than it was before the project began.

The Bank “has provided Peru with critical support to address environmental concerns,” according to Peruvian Ambassador to the United States, Roberto Dañino, in a letter to the editor published by The Washington Post on October 4, 2003.

“Multilateral financial organizations, with their world class standards, can provide the frameworks and tools to monitor and enforce environmental standards," Dañino added in his letter.

The IDB is providing up to $135 million in financing to the pipeline company Transportadora de Gas del Perú. The financial package consists of a loan of up to $75 million from the Bank's ordinary capital and a syndicated loan (B loan) of up to $60 million in which funds are provided by other financial institutions.

The whole Camisea project, requiring a total investment of $1.6 billion, consists of three major components: an “upstream component”, which includes gas production in the Camisea fields in the lower Urubamba area, and processing of natural gas liquids and a marine terminal in a coastal complex near Pisco in the Paracas Bay; a “downstream component”, consisting of transportation of natural gas and natural gas liquids in two pipelines across the Andes to the Pisco area on the coast; and a “distribution component”, which consists of transportation of natural gas to Lima for distribution.

In addition, the Bank approved a $5 million loan to the government of Peru to strengthen its monitoring and enforcement agencies and to help address potential indirect and long-term issues. Part of that amount is to be allocated to the recently established Commission for Sustainable Development of Paracas Bay (Comisión para el Desarrollo Sostenible de la Bahía de Paracas).

The goal of the commission is to improve the environmental conditions and long-term sustainability of Paracas Bay. Already existing polluting industries in the Paracas Bay area (such as fishmeal plants) will be cleaned up, and urban planning, environmental control measures and sustainable development strategies will be developed. 

The loan to the government will also assist in establishing a regional environmental and social development fund to help distribute project benefits to local communities and improve social, economic and environmental conditions in the project's area of influence.

Before the IDB financing for the Camisea loan was approved by the Board of Executive Directors in September 2003, the Bank conducted a 19-month process of due diligence that helped to establish the necessary safeguards and systems to properly mitigate and monitor the environmental and social impacts of the project.

During this process, the Bank organized and participated in numerous public hearings and on-site visits to ensure broad civil society consultation and participation in the project, which will continue throughout the life of the loan (after construction is completed).

The IDB promoted various other measures, such as reduction of the size of the seismic survey area for hydrocarbon deposits in the Urubamba Valley within the Nahua -Kugapakori reserved lands, enhanced protection status for the Nahua-Kugapakori indigenous area, and creation of new environmental protection areas surrounding the Camisea gas field.

The Bank also promoted and helped finance the deployment of monitors to inspect environmental and social conditions associated with the project. The Peruvian government presented the Bank a letter of commitment pledging to mitigate environmental impacts and enhance civil society participation in the project.

The Camisea natural gas project, scheduled for completion in August 2004, will reduce the cost of power generation by 30% on average over the concession period as a result of the use of gas-fired generated electricity. Lima will also reduce air pollution by replacing other fuels with natural gas, the cleanest of the fossil fuels.

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