Peru LNG Project, Peru

The Peru LNG project is set to be one of the most important resources of the Peruvian government's future energy strategy. The project, which was launched in January 2007, will also be one of the largest industrial projects ever to be undertaken in Peru.

The international project consortium for the project consists of Hunt Oil Company of the United States, SK Corporation of Korea and Repsol YPF of Spain. The operator for the Peru LNG gas export project will be Hunt Oil Company as the subsidiary Hunt Oil Peru.

The natural gas resources in excess of domestic demand will be exported as a sustainable commodity over 20 years with exports expected to commence in mid 2010.

The total investment for the project, including the liquefaction plant ($1.5bn), related marine and pipeline facilities and development and financing costs is estimated at $3.8bn.

Once in operation, Peru LNG is expected to generate roughly $800m annually of hard currency export revenues. During the construction phase, 35,000 direct and indirect jobs will be generated. Financing for the project is expected to come from a variety of sources, including the Inter-American Development Bank, with which Peru LNG signed an $800m mandate letter in July 2006.

CONSTRUCTION

The Engineering, Procurement and Construction (EPC) contract for the project was awarded to the Chicago Bridge & Iron Company NV (CB&I). The entire project is expected to take four years to complete. The facilities to be constructed will include an LNG Plant at Pampa Melchorita, Peru, including marine export facilities and an ocean breakwater and a natural gas pipeline to transport feed gas from Ayacucho to Pampa Melchorita.

The selection of the Pampa Melchorita site was based on its natural characteristics and a location that is far from populated communities. Engineering improvements have been made to the plant design based on the finalisation of gas supply and LNG sales agreements and the selection of an inland rock quarry site from which to build the breakwater.

The LNG plant will be a single train facility with a capacity of 4.4 million metric tons a year. It will be able to carry out the following functions: feed gas receiving, liquid separation, gas metering and pressure reduction, removal of carbon dioxide and water from the feed gas. The equipment and utilities will include gas dehydration and carbon absorption units, facilities for refrigeration and liquefaction, LNG and refrigerant storage.

PIPELINE

A major element of the project will be construction of a 34in diameter pipeline for the transportation of natural gas from Chinquintirca in the mountains around Ayacucho to the LNG Plant at Pampa Melchorita on the coast.

The pipeline will run for 408km through 22 districts, nine districts in Ayacucho (Paras, Socos, Vinchos, Tambillo, Acocro, Chiara, Acos, Vinchos, San Miguel and Anco), four districts in Huancavelica (Ayaví, Tambo, Huaytará and Pilpichaca), eight in Ica (Huancano, Humay, Indepencia-Pisco province and El Carmen, Alto Larán, Chincha Alta, Pueblo Nuevo and Grocio Prado-Chincha province) and one in Lima (Cañete).

The final route of the pipeline is still under consideration but will be finalised by the second quarter of 2007, by which time construction is due to start with completion projected for 2009–2010.

SITE SELECTION

Selection of the site for the LNG project required the following criteria:

• Oceanic conditions suitable for reliable tanker and berthing operations
• Proximity to commercial centres that could provide raw materials and labour
• Clear areas of land on the coast with a minimum distance from shore to at least 15m water depth
• Elevation of at least 20m to mitigate the effects of tsunami hazard
• Minimal environmental sensitivity
• No densely populated areas
• Stable soils to prevent damage from Peru's high level of seismic activity

Initially 17 sites were evaluated and then a more detailed assessment was applied to the selected few: Pampa Clarita, Punta Corriente and Pampa Melchorita. More extensive studies were conducted at these three potential sites, which included onshore and offshore engineering studies, environmental baseline studies, and geo-technical, archaeological, and socio-economic assessments.

Pampa Melchorita was chosen as the best option based on a number of environmental, technical and economic considerations.

PAMPA MELCHORITA

Pampa Melchorita in the province of Cañete (population of 174,000, mainly in the two towns of Cañete and Chincha) is 169km south of Lima and was selected as the site for the liquefaction facility as far back as 2002.

The site has 521ha (1,300 acres) of available land space and is located on a tract of desert land along the Pacific Ocean directly off the Pan-American Highway. It showed positive results from technical studies and no significant archaeological interest.

The LNG site at Pampa Melchorita is located on a steep cliff with a 140m drop to the beach.

Pampa Melchorita is located in what is defined as a subtropical desert climate, characterised as extremely dry with very low levels of precipitation year round. Vegetation is minimal along much of the coastal desert of central Peru, but there are a few small pockets of hilly grasslands and woodlands along semi-dry creeks and small rivers in areas surrounding Pampa Melchorita. MacroConsult of Peru performed various analyses of the potential economic impacts of the Peru LNG export project.

MARINE FACILITIES

Marine facilities will consist of various projects including a 1.35km-long trestle from the shore to the loading platform. The trestle will consist of a steel superstructure supported by steel piles and a concrete abutment. During construction, a 200m rock load-out jetty is planned to be positioned along the trestle to aid in breakwater construction.

Because the Peruvian coastline is exposed to long period Pacific swells during parts of the year, a breakwater will provide for safe berthing and will allow the marine facilities to remain accessible all year-round. The breakwater will be situated in a depth of approximately 14m of water and will be 800m long, and align parallel to the coastline and the sea bottom contours. It will be built with rocks from a nearby quarry.

An LNG tanker navigational channel will be dredged to provide access in and out of the berth area. The channel will have a water depth of 15m, a width of 250m and a total length of 3,600m. Where the LNG carriers make turns outside the protection of the breakwater, the channel will be 18m deep.

The LNG berth structures will consist of a 30m x 30m loading platform, four breasting dolphins and six mooring dolphins. The steel berth structures will consist of open grid decks on beams supported by piles driven through jackets.

LNG loading will be accomplished by using four 16in specialty pipe-and-swivel LNG loading arms. Three arms will normally be used for LNG loading and one will be used to return vapour to the plant's boil-off gas compressors.

Permanent berth facilities will be provided to maintain three full-time tugs on location. Tug berths will be located immediately adjacent to the northern mooring dolphins. A small utility dock will be provided on the north side of the trestle approximately 90m from the loading platform to berth tugs temporarily for refuelling from the plant's fuel tank. The utility dock will also have the facilities and equipment required for spill containment.