May 2009 Vol. 236 No. 5

Features

The Challenge Of Delivering Natural Gas To Southern Peru

In October 2008, the Peruvian government announced that Kuntur Transportadora de Gas had been awarded a 30-year concession contract to build and operate a 675-mile natural gas pipeline that will extend from the Camisea gas field, located in the Amazon jungle, to the port of Ilo, on the south Pacific coast of Peru.

The proposed pipeline will deliver gas to many cities in southern Peru and will enable:

• The development of petrochemical facilities;
• The installation of electric power plants that will allow small to large industrial and mining facilities, as well as residential customers to switch to a more efficient energy source; and
• The distribution of compressed natural gas (CNG) in the southern region of Peru.

Kuntur Transportadora de Gas is a Peruvian company entirely owned by Latin Power III, which is one of the private equity funds managed by Conduit Capital Partners, LLC based in New York. The word “Kuntur” is in the Quechua tongue, which is a native language of South America (it was the language of the Inca Empire), and means Condor. The Andean Condor inhabits the Andes mountains (Figure 1).

Figure 1: The Andean Condor inhabits the Andes Mountains.

Development and construction costs for the pipeline, known as “Gasoducto Andino del Sur” (South Andean Gas Pipeline), have been estimated in the range of US$1.4 billion, considerably higher than the US$850 million alternative presented by Suez Energy Peru to run the pipeline down the Pacific coast to the southern city of Ilo. Peruvian government officials chose, however, the former proposal, which they declared would favor a much larger population, mainly in cities located in the Andes.

Figure 2: Map of proposed South Andean Gas Pipeline route.

Kuntur Transportadora de Gas’ proposed route (Figure 2) for the pipeline was based on preliminary technical and environmental studies. However, now that they have been awarded the concession, they are expected to begin the full development of the project, including the signing of firm off-take contracts, environmental and social impact studies, detailed engineering, financial structuring and the incorporation of additional equity participants. Construction is expected to begin in 2010 and the pipeline should be operational by the end of 2012.

Geographical Challenges

Peru’s topography is extremely variable, from flat areas in the lower rainforest and coast, to deep canyons and valleys with steep slopes of 50 or even 60 degrees in the Andes (Figure 3) and higher jungle. Access can be very difficult, making the use of helicopters necessary in some regions of the Andes and rainforest. The Andes high-lands can easily reach 4,800 meters above sea level, and are the origin of a great number of steep gradients and short rivers draining toward the Pacific Ocean, as well as long and large-flow rivers draining toward the Amazon (Figure 4).

Multiple river crossings will most certainly be unavoidable during the construction of the pipeline. Some cross-ings may require the use of horizontal directional drilling (HDD), while others may need to be aerial. The need of tunnels to penetrate mountain areas with rough topography and geological risks cannot be discarded.

Figure 4: Topographic map of proposed route.

Adequate preconstruction planning for pipeline erosion control will also be required, as has been learned, un-fortunately, from several leaks in the Camisea natural gas liquids (NGL) pipeline, which runs parallel to the nat-ural gas pipeline already in operation. Six leaks have been reported in the first three years of operation in the section of the NGL pipeline that runs from the rainforest and ascends into the Andes.

Most of the failures were attributed to excessive forces exerted on the pipeline due to lateral earth movements. Interestingly enough, the natural gas pipeline that runs parallel, has not suffered any rupture to date. However, it has been determined that it is the larger size and wall thickness of the natural gas pipeline which has allowed it to withstand the additional loads without failing.

The NG pipeline is 32 inches by 0.625 inches vs. the NGL pipeline of 14 inches by 0.219-inches. The geological and geotechnical conditions and risks (landslides, mudslides, erosion, river crossings, superficial failures, etc.) of the new South Andean Gas Pipeline will therefore have to be sufficiently assessed and mitigated.

The shortest route between two points will not always be possible. Both engineering and logistic feasibility, as well as environmental and social integrity have to be considered. Lack of adequate infrastructure and the need for building new roads and bridges or repairing existing ones will have to be taken into consideration in defining the final route. Last, but not least, the Peruvian territory is well-known to be a seismically active area, typically prone to earthquakes. Therefore, associated risks have to be assessed and the design and construction will have to be able to withstand this phenomenon.

Environmental And Social Challenges

Peruvian legislation requires an Environmental and Social Impact Assessment (ESIA) to be developed for the project.

Soil erosion and subsequent sedimentation of waterways near the right-of-way (ROW) are the key potential environmental impacts of the pipeline construction. The likelihood of archaeological artifacts along the ROW, landowner grievance management and effects of neighboring communities are the key potential social impacts. Peru’s great cultural legacy is evidenced by the large number of archaeological sites found throughout the coun-try. There is little doubt that numerous archaeological sites will be encountered along the path of the new pipeline.

In many cases, the size and importance of the archaeological remains will make it necessary to shift the planned route. To understand the magnitude of this challenge, we only have to look back at the 456 miles of the Camisea natural gas pipeline built in 2002-2004 by TGP (Transportadora de Gas del Peru). TGP had to form a team of dozens of archaeologists to record all findings along the path of the pipeline. In total, more than a thousand archaeological sites were found in rain forest, Andes highlands and coastal areas.

The project also has the potential to affect indigenous people who live in voluntary isolation along sections of the planned pipeline route in all three regions: Amazon jungle, Andes Mountains and coastal area. Therefore, the final route decision will have to provide geotechnical stability, safety and reliability of the pipeline system, and at the same time minimize the social, cultural and environmental impacts.

Differences With Other Regions

Building transmission pipelines in a rough topography brings with it a higher risk of failures due to natural ha-zards (mainly landslides). Twenty-five years ago, pipeline rupture rates of 2.8/1,000 km/year in the Andes Mountains were the standard. That rate has improved. In the last 15 years pipelines built in the western side of the South American continent (Andes Mountains) – using best geological engineering practices – can show rup-ture rates of approximately 0.33/1,000 km/year. Although it is a great improvement, the figure is still three times higher than the 2007 European Gas Pipeline rupture frequency of 0.11/1,000 km/year (source: Seventh EGIG report).

Conclusion

The construction of the South Andean Gas Pipeline will present several challenges to its builders, mainly due to the extremely variable topography of the regions it will traverse, and the geological and geotechnical conditions and associated risks. A thorough assessment and mitigation planning will be necessary. The lack of adequate infrastructure will require planning and investments for the construction of roads and bridges in order to transport materials and access the right of way. In addition to the geographical challenges, the project will face potential environmental and social impacts which will affect the planned route. The success of the project will be based on achieving geotechnical stability, safety and reliability of the pipeline system, and–at the same time–minimizing the social, cultural and environmental impacts.

Author

Antonio A. Montes is business development manager for the Industrial Services division of SGS, based in Houston. The SGS Group describes itself as a global leader and innovator in inspection, verification, testing and certification services.