The Inter-American Development Bank (IDB) announced today the signing of a mandate letter with Hunt Oil, SK Corporation and Repsol YPF S.A. to consider the financing for a Liquefied Natural Gas (LNG) project in Perú. 

The Perú LNG project (“Project”) consists of the construction and operation of an LNG plant, a related marine loading terminal and a 408 km 34-inch pipeline extension which will connect the Plant to the existing Transportadora de Gas del Peru (“TGP”) gas pipeline. The PLNG pipeline will run from the end of the rainforest portion of the TGP line to the Plant.

The Project will liquefy natural gas purchased from Blocks 56 and 88 in the Camisea gas fields and sell it to Repsol Comercializadora de Gas S.A. (Repsol CG) for export most likely to markets in Mexico but possibly Chile and the United States for re-gasification. The Project will positively impact the energy matrix in the Latin American region.

The mandate enables the Bank to access confidential information and financial resources from the project sponsors to conduct financial, technical, environmental, social and legal due diligence. The Project will have to conform to the Bank’s rigorous standards in each of these areas, including the Bank’s new Environmental and Safeguards Compliance Policy and Indigenous Peoples Policy, in order to be considered eligible for financing.
 
The decision to finance the Perú LNG project is contingent on the results of this due diligence and subject to approval by the IDB’s Board of Directors.

The Bank is considering this project based on the unique importance it represents to Peru’s economic growth. The LNG project is a key strategic element in Peru’s overall energy plan to capitalize on its extensive gas reserves in the Camisea fields by exporting them to other markets. The Project will monetize Peruvian natural gas resources in excess of local demand, providing the country with a sustainable export commodity. 

The Project will generate roughly US$800 million in annual hard currency revenues, increasing the country’s total exports by an estimated 1.5% and transforming Peru into a net hydrocarbons exporter in the medium term.

With a total cost of approximately $3.2 billion including financing costs, the Project represents the largest foreign direct investment ever made in the country. PLNG will spend approximately $1 billion on local salaries and goods and services.

Additionally and as a result of the project, the Peruvian government will receive an average of $200 million per year in incremental royalties and US$150 million in additional income taxes over the first 20 years.

The entire project is expected to yield $4.8 billion in net present value terms in cumulative economic benefits, or an amount equivalent to 6% of Peru GDP in 2005.

For more information on this project, please see attached fact sheet.
 

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