At $4bn, the nearly 1200-kilometre gas pipeline stretching from Peru’s jungle interior across the vaulting Andes mountain range and down to its southern coast, the Gasoducto Sur Peruano project is the largest investment of its kind in Peru's history and represents a milestone for FDI in the country.
“The south of Peru is one of the most populated but also poorest parts of the country, and gas is the cheapest and certainly the cleanest of Peru's resources,” says Eleodoro Mayorga, Peru’s minister of energy and mines.
“Gas is an abundant resource that is badly needed to generate electricity [and be used] for industrial purposes. The plans are to develop a petrochemical industry in the south. The project has all of these components: [it will aid the] development of a poor area, [help meet the] electricity demand of the country and [meet the country's] need for industrialisation, of petrochemicals in particular.”
The project, a 75/25 split between Latin American infrastructure investment firm Odebrecht Latinvest Peru Ductos and Spanish gas company Enagás Internacional, is a 34-year concession that will employ 6500 people at the peak of construction, and will be undertaken in three separate stages.
Gasoducto Sur Peruano will be both financially and logistically highly complex, with financing coming from a number of banks from the US, the UK, France and China. Starting in the Amazon rainforest, the pipeline will snake through the Andes up to an elevation of 4900 metres – with about half of the pipeline above 3000m – before descending to the coast.
These factors provide an added challenge as, above 3000m, the equipment used to build the pipeline will lose about one-third of its power due to a lack of oxygen, while above 4000m, snow will be present all year round.
One section of the pipeline, which stretches about 80km, is so deep in the Amazon that the only way to get to the construction points will be either via river or helicopter. On top of this, more than 400km of roads will need to be either refurbished or built from scratch in order to transport equipment into and out of construction sites, as well as for the long-term maintenance needs of the finished pipe.
All hands on deck
“You have the logistics challenge, the access challenge, the height-of-the-Andes challenge and the environmental challenge,” says Luiz Cesar Costa, Gasoducto Sur Peruano’s general manager in Peru. “We need to be sure that we're preserving the ecosystem.”
After raising a $600m bridge loan, Odebrecht has already begun work on some of the roads needed to construct the pipeline, and will be enlisting the help of foreign professionals who worked on a recently completed pipeline in Argentina to help address the needs of specialised equipment operations, welding and other endeavours.
Of the 12,000 families who will be impacted in the area of influence of the pipeline, Odebrecht says that it plans to implement social projects and to employ some residents in the construction project itself. Construction on the Gasoducto Sur Peruano project is slated to be completed by December 2017.