PERU: Substandard Peruvian Gas Pipeline Blamed for Spills

A pipeline crossing the Peruvian Amazon has spilled natural gas liquids
four times since it opened 15 months ago because it was shoddily built
by unqualified welders using corroded pipes left from other jobs,
according to a new technical report by the nonprofit environmental
consultancy E-Tech International based in San Diego.

Written by a certified pipeline welding inspector who inspected
sections of the Camisea pipelines during the construction phase, the
report indicates that the pipeline was laid quickly on difficult
terrain to avoid late completion fines that could have totaled $90
million. Nearly 185 kilometers (115 miles) of the pipeline remains at
high risk of rupturing, the E-Tech report warns.

A break in the Camisea pipeline that appeared on December 22, 2004 (Photo courtesy E-Tech)

The pipeline is one of two that carry natural gas and natural gas
liquids from the Camisea fields along the Urubamba River 430 kilometers
(270 miles) east of the Peruvian capital Lima, to a fractionation plant
on the Peruvian coast south of the capital city. The pipelines traverse
the rainforest and cross the Andes mountains at an elevation of 4,800
meters above sea level.

The E-Tech report was presented to the project's funder, the
Inter-American Development Bank (IDB), at a public consultation at the
bank's headquarters in Washington.

Peruvian and international organizations, including the Society
for the Protection of Environmental Law, Amazon Watch, World Wildlife
Fund-Peru, the Amazon Alliance and Environmental Defense as well as the
non-profit environmental consultancy E-Tech International, testified
during the daylong meeting at the IDB's headquarters in Washington, DC
on Monday.

The only senior IDB executive to attend was Executive Vice President
Ciro de Falco, who stayed for several minutes, delivered a prepared
statement, took no questions, and missed the other presentations.

Bank officials failed to explain why previous commitments to
prevent spills from the pipeline have not stopped them. In its first 15
months of operation, the pipeline has ruptured four times, with three
major spills.

Michael Valqui, program officer for World Wildlife Fund - Peru
said, "This annual meeting highlights that key promises and commitments
given at the outset of the Camisea project by the government of Peru,
IDB and the companies for the most part, have not been realized."

Laying the Camisea pipelines through the Peruvian Andes (Photo courtesy Camisea Project)

The
Camisea gas project has been controversial in Peru and at the IDB since
breaking ground in 2001. The gas is being extracted in one of the most
biodiverse tropical rainforests in the world, home to thousands of
indigenous people, including some of the last indigenous groups living
in isolation anywhere in the Amazon.

The civil society groups faulted the bank for continuing informal
talks with members of the project consortia, including leading
shareholder Hunt Oil, based in Texas, over financing deals for future
phases of the controversial Camisea project, before resolving the
multiple problems of the project's first phase.

During meeting bank officials indicated they are likely to
begin formal due diligence to consider financing the second phase of
the Camisea project.

Maria Ramos, southern Peru campaigner for Amazon Watch, said,
"The companies again insist there will be no more ruptures, but the
last time they promised that, there were four. The world's most
biodverse rainforests and the highly vulnerable indigenous communities
that live there are in real jeopardy."

In addition to Camisea Phase II, the Peruvian government plans 16 new hydrocarbon contracts in the Amazon rainforest.

"It is clear that the Peruvian government does not have the
capacity to adequately regulate a project of this massive scale; never
mind the 16 new hydrocarbon projects that are slated for Peru's
rainforest regions," she said. "There is little planning or
coordination and the Peruvian government is in over its head."

The groups say Camisea profits are not going to assist the
indigenous communities that suffer the consequences of spills and
destruction of their rainforest territory. Despite the IDB and Peruvian
government's rhetoric of "development" and "poverty alleviation," the
groups point out, 40 percent of the Camisea royalties paid to the
central government have been set aside by Peruvian legislation for arms
procurement.

Although Block 88, the first phase of the Camisea project, is
already operating, the E-Tech International report's warnings are
timely, the groups said because the pipeline feeder network will soon
be expanding to serve other nearby concessions, including Camisea II,
which involves many of the same companies and broke ground last month.

Bill
Powers is the chief engineer of E-Tech International and the principal
of Powers Engineering, an environmental engineering firm established in
San Diego in 1994. (Photo courtesy E-Tech)

Engineer Bill Powers of E-Tech said, "When you have a project of this
scale in an area as sensitive as the Peruvian Amazon rainforest, then
you need your A-team. Unfortunately, the construction work on this
pipeline was hastily done and without adequately qualified
supervision."

Peter Kostishak, co-director of the Amazon Alliance, said, "While the
IDB talks about 'benefits that don't evaporate', the truth is that the
indigenous communities in the Amazon suffer liquid gas spills that
don't evaporate. In return for contamination of their food and drinking
water, they receive a miniscule percentage of this energy project's
windfall profits."

Juan Miguel Cayo, Peru's vice minister of Energy and Mines, who
did attend the meeting, admitted that the poverty of the affected
communities, as contrasted with the funds received by local government
officials from Camisea, is "immoral." He said investments in healthcare
for affected communities are badly needed.

Aendoshari native people who live near the gas extraction site in the Cusco Department (Photo courtesy Camisea Project)

The meeting did provide a glimmer of hope for skeptical
environmentalists and indigenous rights advocates. In a response to
allegations that it had used corroded pipes left over from other
projects, the president of the pipeline consortium Transportadora de
Gas del Peru, agreed to open its internal pipeline records, known as
the Paybook, to civil society experts.

The groups are now seeking an independent audit of the pipeline and better planning before future work begins.

IDB officials agreed to meet with Peruvian civil society groups to
jointly set terms of reference for an independent audit of Camisea, an
audit which the bank has the contractual right to initiate.

The E-Tech assessment report states that the most problematic
sections of the route are characterized by steep slopes, unstable
soils, and difficult working conditions during pipeline construction.

The first preventative step should be the complete restoration of the
right-of-way slopes within the areas with highest rainfall and along
the steepest slopes, E-Tech advises. Concurrently, an audit of the
entire pipeline construction process, including radiographic anaylsis
of all welds along the entire pipeline route, conducted by certified
radiographic specialists is warranted, the report states.

In addition to corrosion and imperfect welds, problems occurred
when the proposed original route in the environmental impact assessment
was altered, E-Tech reports. The unauthorized alterations were due to
the presence of archaeological zones, to reduce costs, or to avoid
wetlands. "This approach subjected low lying areas to landslides and
the resultant sedimentation of streams," the report states.

Powers said, "The spills were predictable, and, we believe,
there will be more ruptures unless there is a complete examination of
pipeline construction process to properly assess pipeline integrity and
detailed remedial action measures to assure the damaged areas are fully
stabilized and restored."

The E-Tech report is available online at E-Tech International's website: www.etechinternational.org

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