Cablegate: Camisea Greenlight: Repsol to Export Lng

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS LIMA 003375

SIPDIS

STATE FOR E, EB A/S WAYNE, WHA A/S NORIEGA, OES A/S TURNER
ALSO FOR WHA/AND, WHA/EPSC, EB/IFD/ODF, OES/ENV
TREASURY FOR U/S TAYLOR, K. KOZLOFF, G. SIGNORELLI

PLEASE PASS TO USAID - LAC, EGAT

SENSITIVE

E.O. 12958: N/A
TAGS: ENRG SENV EPET SOCI EINV ECON ETRD PGOV PE
SUBJECT: CAMISEA GREENLIGHT: REPSOL TO EXPORT LNG

REF: LIMA 2236 AND PREVIOUS

1. (U) SUMMARY: Hunt Oil's liquefied natural gas project
cleared its last major hurdle to securing financing for its
planned Peru plant. On August 1,Spanish firm Repsol agreed
to buy the 4 million annual tons of LNG for 18.5 years.
Hunt hopes to secure financing and begin construction of the
LNG plan by December, with exports to start in 2009. Repsol
will probably ship the LNG to its proposed deliquification
plant in central Mexico to supply the Mexican and western
U.S. markets. END SUMMARY.

2. (U) On August 1, Repsol YPF, the Spanish Oil firm's
Peruvian subsidiary, announced with Peru LNG company (70
percent owned by U.S. firm Hunt Oil) an agreement for Repsol
to purchase the liquefied natural gas (LNG) for export
produced by the Camisea natural gas project (Reftel) in
Peru. Hunt's construction of an LNG plant south of Lima
would be the second, export phase of the Camisea project.
The Peru LNG liquefaction plant to be built south of Peru
would export an estimated 4 million tons of LNG every year;
the agreement spans 18.5 years from the LNG plant's startup.

3. (SBU) Peru LNG had previously signed an agreement to
purchase the Camisea gas as it is piped from the Amazon, but
finding a buyer for the LNG product was the last major
obstacle to securing financing for the 2.1 billion plant
construction. Peru LNG has been exploring financing with
the IFC, IDB, CAF and EXIM, as well as local bond issuers.
Barbara Bruce, VP of Hunt Oil's Peruvian subsidiary, told
Econoff that the Repsol deal would give Peru LNG the needed
credibility to close on financing.

4. (U) The deal includes agreement for Repsol to acquire 20
percent of Peru LNG, as well as Hunt's 10 percent of
Transportes de Gas de Peru (TGP) and 10 percent of Hunt's
stake in the Camisea gas fields. The TGP consortium pipes
natural gas from the Camisea fields in the Amazon to
consortium PlusPetrol's Paracas Bay terminal; a planned
extension of the pipeline would stretch to the LNG plant
site.

5. (SBU) Other obstacles to proceeding with construction
have mainly been resolved. Environmental permitting is
continuing apace. Bruce said that Hunt's plan to break
ground by the end of 2005 is aggressive but still possible;
LNG exports are still planned to begin in 2009.

6. (SBU) One unresolved issue is the jurisdiction of the
plant site for taxing and royalty-sharing purposes. The
site lies in a coastal desert straddling the border between
the Lima and Ica Departments. The border was never
adequately plotted in this area, and the lure of property
taxes and a share in royalties led to a dispute between the
adjoining provinces in the two departments. The respective
regional governments took up the cause, and the boundary
determination is now in the hands of the Peruvian Congress.
Gustavo Navarro, Camisea point person in the Ministry of
Mines and Energy, and Hunt's Bruce told Econoff that it is
unclear when Congress will act. (Note: Congressional
commissions are being reorganized and no action is likely
soon. End Note.)

7. (SBU) While not yet certain to whom Repsol will sell the
LNG, Repsol continues to plan for a deliquefaction plant in
central Mexico that would supply the Mexican and West Coast
U.S. markets. Carlos Alfonsi Ciafrelli, new president of
Repsol YPF, told Econoff that while Repsol's export plans
have not been finalized, Repsol's priority is to ship the
LNG to Mexico and the U.S.

STRUBLE

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