UPDATE 1-Humala says Peru building $3 bln natural gas pipeline

Thu Mar 29, 2012 2:02pm EDT

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LIMA, March 29 (Reuters) - Peru will soon start construction on a $3 billion natural gas pipeline from the Camisea fields that will feed planned petrochemical plants on the country's southern Pacific coast, President Ollanta Humala said on Thursday.

Brazil's Odebrecht and the U.S. firm Conduit will build the 620-mile (1,000 km) long pipeline, which has been stalled for several years.

Construction is expected to start in next couple of months. It would be the country's second pipeline from the Camisea gas fields in Peru's southeastern jungle. The existing pipeline runs north toward the capital Lima. The new pipeline will run from near the Inca city of Cuzco to Arequipa.

Humala, who took office in July and campaigned on promises to make inexpensive natural gas widely available on the domestic market for use in kitchens and cars, said the pipeline would help transform Peru's energy matrix, which is highly reliant on petroleum imports.

He also said the pipeline would help develop the country's poor southern provinces.

"This region has historically been ignored by the state," he said wearing a blue-feathered headdress and a poncho in the jungle town of Quillabamba.

"This project will generate more than 40,000 jobs, more than 2 percent of GDP and related industries. We'll have the first petrochemical complex in the southern Pacific," he said.

Major global energy firms have said they plan to participate in the petrochemicals plants, which would produce everything from fertilizer to explosives, but they first need to have steady and guaranteed supplies from the Camisea fields.

Humala is also trying to steer more gas from the Camisea fields to the domestic market.

The Peru LNG consortium, which is led by US-based Hunt Oil and also includes South Korea's SK Energy and Japan's Marubeni, began exporting liquefied natural gas in 2010 from the Peruvian liquefaction plant in Pampa Melchorita.

Humala said that next week he will announce an agreement with the consortium of firms that operate Camisea to earmark fuel from Block 88 in the gas fields to domestic use.

The consortium includes Argentina's Pluspetrol, Repsol-YPF, Hunt Oil, SK, Algeria's Sonatrach and Tecpetrol Argentina.

Talks over Block 88 will not impact exports because they are fed from another area, Block 56. Peru says it has gas reserves of between 11.2 and 18.6 trillion cubic feet in its two main blocks.

Negotiations between the Peruvian government and the consortium began in July 2010 during the administration of former president Alan Garcia.

"Without having to take any drastic measures, we have made sure that the Camisea consortium will identify with national needs and collaborate on this project," Humala said. (Reporting By Terry Wade, Omar Mariluz and Patricia Velez; Editing by Bob Burgdorfer)

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