Camisea boosts
Peru’s economy …but
poverty, unemployment still looms
By Charissa Mooteeram, Research Analyst, CMMB
The
Trinidad Guardian
Port
Spain
Petroleumworldtt.com
02 25 07
The
US$1.7 billion Camisea natural gas project has been
a major catalyst behind Peru’s recent strong
economic performance. The Camisea project, which
extracts natural gas originating near the Urubamba
River in central Peru, became operational in August
2004.
Already,
this large-scale investment has contributed to five
years of strong economic growth and favourable prospects
over the medium term. Camisea is expected to add
just over one percentage point to Peru’s growth
rate every year for more than 30 years, which will
help to reduce poverty and increase tax revenue
and export earnings.
Economic
growth is forecasted around six to seven in 2007.
Additional benefits include significant foreign
investment flows, potential development of a gas-based
petrochemical industry as well as new employment
opportunities.
The
development of the Camisea fields also opens the
possibility of developing a liquefied natural gas
(LNG) facility to export natural gas to Mexico and
the United States.
The
project has received support from the oil and gas
industry as well as various development banks. The
Inter-American Development Bank (IDB) reports that
“the Camisea project could significantly raise
the national standard of living, lower the cost
of energy and reduce air pollution.”
Despite
these benefits, several environmental concerns have
arisen since its inception.
Peru
has proven natural gas reserves of 8.7 trillion
cubic feet, the fifth largest amount in South America
and will likely become a net gas exporter when the
Camisea project comes fully on stream drawing over
$3 million in foreign direct investment and generating
$10 billion in government revenues over the next
three decades. Even with this macroeconomic success,
the challenge of reducing Peru’s poverty and
unemployment still remains.
According
to reports, companies are expected to invest $10
billion in mining projects during the next five
years, followed by oil and gas ($3.2 billion), industry
($2.8 billion), electricity ($2.6 billion) and $1.3
billion in infrastructure.
With
such high expectations arising from the Camisea
project, Peru will be closely monitoring the price
of natural gas, but more importantly, the level
of output. Peru’s natural gas output fell
to a nine-month low in January 2007, as hydro-electric
output at electricity generators surged, curbing
demand.
Despite
this fall, output is expected to rise this year
as gas fired power plants come online and filling
stations are built.
Gas
production is expected to reach five billion cubic
metres by 2010 allowing an average export of 3.3
billion cubic metres, as liquids from the huge Camisea
field increase natural gas output.
Thus
far, the Camisea project provides natural gas for
domestic consumption but it will eventually exceed
domestic demand leading to the export of any excess
production.
Natural
gas is becoming the fuel of choice in many regions
of the world as it is a more environmentally attractive
energy source that burns more effectively than coal.
With
worldwide consumption expected to increase at an
average rate of 2.4 per cent annually till 2030,
Peru will realise substantial economic benefits
from increasing Camisea gas exports.
A
major challenge for the Peruvian government will
be to maintain fiscal prudence in the face of these
windfalls.
All
information contained in this article has been obtained
from sources that CMMB believes to be accurate and
reliable. All opinions and estimates constitute
the author’s judgment as of the date of the
article; however neither its accuracy and completeness
nor the opinions based thereon are guaranteed. As
such, no warranty, express or implied, as to the
accuracy, timeliness or completeness of this article
is given or made by CMMB in any form whatsoever.
The
Trinidad Guardian
Thursday 22nd February, 2007
Copyright
©2007 The Trinidad Guardian. All Rights Reserved.
