Peru wins LNG case against Camisea gas consortium

OREANDA-NEWS. Peru has prevailed in an international dispute with the Camisea consortium over royalty payments tied to the reload of LNG.

The World Bank's International Center for Settlement of Investment Disputes (Icsid) on 21 May ruled in favor of state-run upstream promotion agency PeruPetro in the long-running controversy.

In September 2011, PeruPetro detected that 10 LNG cargoes shipped to the Freeport, Sabine Pass and Cameron terminals on the US Gulf coast between August 2010 and March 2011 had been re-exported to Asia. Although reloads are permitted, royalties must be paid on the final destination, not the reload terminal.

PeruPetro filed for arbitration against Camisea operator Pluspetrol of Argentina in August 2012.

PeruPetro successfully argued for compensation for royalties lost as a result of the reload and maintained that Pluspetrol, and not the Peru LNG liquefaction facility, was ultimately responsible for the gas under its contract. Pluspetrol countered that it was not responsible for exports or for the actions of traders.

While the amount of the award has not been disclosed, PeruPetro's director when the case was filed, Aurelio Ochoa, said the amount should be around \$50mn. "This is excellent news for Peru," he said.

The Camisea consortium has not commented on the ruling.

The consortium, which began operations in 2004, includes Pluspetrol (27.2pc), US firm Hunt Oil (25.2pc), South Korea's SK Energy (17.6pc), Algeria's Sonatrach (10pc), Argentina's Tecpetrol (10pc) and Spain's Repsol (10pc).

The consortium has proven gas reserves of 3.2 trillion ft3 on block 56, which is earmarked for exports. Block 88, which has 9.5 trillion ft3 of reserves, is used for domestic consumption.

Peru LNG is operated by Hunt (50pc) and includes SK (20pc), Shell (20pc) and Japan's Marubeni (10pc). The 4.4mn t/yr plant has dispatched 269 LNG shipments since start-up in June 2010. Around 70pc of production goes to Mexican state-owned utility CFE under a long-term contract. The balance is sold on the spot market.