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Viewing cable 06LIMA952, GOP INVESTIGATING CAMISEA PIPELINE RUPTURES

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Reference ID Created Released Classification Origin
06LIMA952 2006-03-10 17:33 2011-08-25 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Lima
VZCZCXYZ0000
RR RUEHWEB

DE RUEHPE #0952/01 0691733
ZNR UUUUU ZZH
R 101733Z MAR 06
FM AMEMBASSY LIMA
TO RUEHC/SECSTATE WASHDC 9113
RUEHQT/AMEMBASSY QUITO 0108
INFO RUEHBO/AMEMBASSY BOGOTA 3097
RUEHBR/AMEMBASSY BRASILIA 6563
RUEHBU/AMEMBASSY BUENOS AIRES 2296
RUEHCV/AMEMBASSY CARACAS 9154
RUEHLP/AMEMBASSY LA PAZ MAR SANTIAGO 0276
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC
UNCLAS LIMA 000952 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR WHA/AND, WHA/EPSC, OES 
TREASURY FOR U/S TAYLOR, K. KOZLOFF, G. SIGNORELLI 
STATE PASS TO EXIM - A. FOLEY, C. O'CONNOR, R. WILLIAMSON 
DEPT OF ENERGY FOR D. PUMPHREY/G. WARD/S. LADISLAW 
ENERGY INFORMATION ADMINISTRATION FOR CHARLES ESSER 
 
E.O. 12958:  N/A 
TAGS: ENRG ECON ETRD EAID SENV PE
SUBJECT:  GOP INVESTIGATING CAMISEA PIPELINE RUPTURES 
 
REF:  LIMA 0742 
 
1. (U) SUMMARY:  The GOP suspended Camisea's gas liquids 
piping amid uproar over pipeline ruptures.  Two recent 
reports allege that substandard pipeline and construction 
procedures used to build the Camisea natural gas line are 
responsible for four pipeline breaks in the past year.  A 
fifth rupture on March 4 reportedly caused injuries 
associated with an explosion.  The Energy Ministry 
Environmental Director cautioned Econoff on March 2 that 
media claims of environmental and health damage (of the 
first four breakages) are exaggerated.  The acting manager 
of the GOP agency that oversees pipeline construction, 
OSINERG, told Econoff that a disparaging report lacks 
objectivity and proof, but has dispatched inspectors to 
investigate the allegations.  The allegations, even if 
exaggerated, point to capacity problems in the GOP 
regulatory agencies that oversee construction, health and 
environmental concerns of the hydrocarbon industry. 
Presidential candidates have quickly jumped on the Camisea- 
bashing media bandwagon with the election just a month away. 
The Embassy will continue to monitor the situation.  END 
SUMMARY. 
 
New Pipeline Rupture; Reports Critical of Past Ruptures 
--------------------------------------------- ---------- 
2.  (U) There have been four ruptures in the Camisea natural 
gas liquids pipeline during the first fifteen months of 
operation, causing cessation of flow and spilling of 
liquids.  Two recent reports have ignited media allegations 
that attribute alleged environmental and human health damage 
to malfeasance in construction of the pipeline.  OSINERG, 
the GOP energy regulating agency that has responsibility for 
overseeing the construction and operation of the Camisea and 
other pipelines, and Transportes de Gas de Peru (TGP), the 
Camisea consortium that built (with U.S. firm Hunt Oil and 
Argentine firm Techint as major shareholders) and operates 
the pipeline, both disputed the reports and announced they 
were conducting their own investigations. 
 
3.  (U) A fifth rupture occurred on March 4, with an 
associated explosion that reportedly injured four persons. 
Energy and Mines Ministry (MEM) Hydrocarbons Director and 
Energy Environmental Director flew immediately to the site. 
Prime Minister Kuczynski noted publicly that sabotage was a 
possibility, but has since apologized for prematurely 
raising this possibility.  (Note: Injuries from a remote 
pipeline rupture are rare.  In the previous four ruptures, 
there was only one confirmed injury from a burn.  End Note.) 
All major media outlets have covered the ruptures 
extensively; several presidential candidates have joined in 
calling for investigations and sanctions for parties proven 
negligent. 
 
4.  (U) On March 7 President Toledo announced a GOP 
investigation into the state of the Camisea pipelines, 
likelihood of future breaks, and causes and extent of 
damages from the past pipeline breaks.  PlusPetrol, the 
Argentine firm with the natural gas delivery concession, 
announced it was suspending delivery of natural gas to two 
electricity plants but otherwise maintaining service.  The 
MEM announced that it had suspended authorization of the 
liquids pipeline use until investigations showed the line 
was safe.  (Note: the gas and liquids pipelines run side-by- 
side from the Camisea fields over the Andes until the 
liquids pipeline terminates at the PlusPetrol fractionation 
plant in Pisco; the gas pipeline continues up the coast to 
the Lima area.  End Note.)  On March 8, the GOP authorized 
OSINERG to procure a comprehensive audit of the Camisea 
pipelines, using a special expeditious process.  This would 
involve retaining an international company (most likely a 
U.S. firm) to conduct the study.  The GOP also designated a 
commission to revise, within 90 days, the natural gas 
transportation regulations. 
 
Reports Allege Bad Pipe, Bad Welding, Fish Kills 
--------------------------------------------- --- 
5. (SBU) The first report on the four ruptures was prepared 
by the U.S. consultant firm, E-Tech, and presented at an 
February 27 Inter-American Development Bank (IADB) meeting 
called to discuss the pipeline ruptures.  (Note: It is 
unclear who funded the report; the report's editor is a long 
time activist for independent Camisea monitoring.  End 
Note.)  The report admits that heavy rains and landslides 
were partial causes of pipeline ruptures, but lays primary 
blame for the four pipeline ruptures on alleged use of 
substandard pipe and on faulty welding.  The author states 
he was a TGP welding supervisor during construction, where 
he witnessed use of faulty welds and substandard pipeline. 
(Note: not mentioned in report is whether author reported 
these deficiencies to his supervisors.  End note.) 
 
6.  (U) The GOP Human Rights Ombudsman prepared the second 
report after a two-year study, describing Camisea project 
effects on four issues that reportedly affected the human 
rights of Peruvians: the right to health of indigenous 
peoples (with reports of increased disease levels, e.g. of 
syphilis); environmental damages from fractionation plant in 
Paracas and pipeline incidents (for example from riverine 
fish kills); compensation of pipeline right-of-way owners 
under GOP eminent domain proceedings; and inadequate citizen 
participation and access to information.  (Note: The second 
and third issues were largely resolved.  Land titling issues 
were, not surprisingly, legion in the vast remote areas 
where most land titles have never been legally determined; 
the number of outstanding title issues in litigation is 
relatively small.  Siting the pipeline 
terminus/fractionation plant near Paracas was controversial 
but no significant environmental problems have been reported 
thus far.  The arrival of a large investor in the area has 
been a boon as the company has contributed funds for the 
restoration of an area long polluted by fishmeal factories. 
End Note.) 
 
GOP Officials Dispute Accuracy of Reports 
----------------------------------------- 
7. (U) The OSINERG Acting Manager, on his way to visit 
pipeline sites in the field, told Econoff on March 3 that 
while OSINERG cannot attest to the quality of each pipeline 
section or weld, TGP did submit appropriate certifications 
during the course of construction.  OSINERG inspectors have 
fanned across pipeline sections to investigate the 
allegations in the E-Tech report. 
 
8. (SBU) Econoff met with Iris Cardenas, Energy 
Environmental Director at the Ministry of Mines and Energy 
(MEM,) on March 2 to discuss the reports.  Cardenas traveled 
to Washington for the February 27 IADB meeting at which the 
E-Tech report was presented; she said that discussion 
revealed that the former inspector was the sole author of 
the report, calling into question the report's objectivity 
and accuracy.  The claims of substandard piping and bad 
welds would have to be investigated by OSINERG, she said, 
but she could speak to the environmental damage alleged in 
the E-Tech and Ombudsman reports. 
 
9. (SBU) Cardenas said she had personally visited each 
rupture site immediately afterwards.  While rupture of the 
liquids pipeline does entail some absorption into water or 
soil, probably 50 percent of the volume evaporates 
immediately; the other 50 percent in the four spills caused 
some transitory contamination but nothing permanent. 
Regarding allegations in Ombudsman and media reports of fish 
kills, Cardenas said that while any fish coming into 
immediate contact with spilled liquids would die, the effect 
is short lived due to the diluting effect of the rivers. 
The reduction in fish populations are due to numerous 
factors, including lack of state control over fishing 
seasons with attendant overfishing and the widespread use by 
indigenous people of barbasco (a tropical plant that 
paralyzes fish). 
 
 
10. (SBU) Regarding other negative health effects from the 
Camisea pipeline, Cardenas noted capacity problems with the 
Ministry of Health's DIGESA health inspection agency.  There 
were no adequate baseline studies for clinical conditions 
such as syphilis, which some indigenous groups have asserted 
have risen.  DIGESA lacks the capacity to systematically 
collect and process environmental samples for health 
testing, Cardenas continued.  Shortly after a liquids 
pipeline rupture, the liquids are flammable for at most a 
matter of hours, but in the first four ruptures so far only 
one burn had been verified. (Note: There appear to be four 
burn or blast victims from the March 4 rupture.  End Note.) 
 
11. (SBU) Cardenas said that there have been regular 
interagency meetings to discuss health and environmental 
effects from the Camisea pipeline.  The GOP Environmental 
agency CONAM chairs the Interagency Environmental Committee 
(CAT), which will next meet April 18 in Cuzco to discuss 
health, environmental protection and education in the 
pipeline areas.  In addition to representatives from MEM and 
the Health ministry, DIGESA and OSINERG, regional and 
municipal governments and the Fisheries Vice Ministry will 
explore together a way forward.  Cardenas noted that 
ineffective use of royalties paid to local governments 
appeared to be a primary reason for lack of services to 
pipeline area residents. 
 
12. (U) Cardenas noted that her office has just published 
new regulations on environmental safeguards during pipeline 
construction and operation.  Construction plans for the next 
major pipeline project, Camisea II (Reftel), will have an 
integrated plan that considers economic effects of the 
pipeline on area residents, environmental impacts and 
engineering safeguards.  (Note: Hunt Oil officials have told 
Econoff that lessons learned from the landslides that have 
afflicted the Camisea I pipeline will be applied to the 
Camisea II line, both in choice of route and construction 
techniques.  End Note.) 
 
Comment 
------- 
13. (SBU) While both reports may be exaggerated or lacking 
in proof, they have served to generate debate and a full 
investigation by all government agencies concerned.  The 
Andes and high Amazon jungle barriers that the pipelines 
cross are formidable, and heavy rains with attendant 
landslides at this time of year have always played havoc 
with engineering projects.  More troubling are the 
indications that there has been inadequate followup to the 
social and environmental impacts from Camisea construction 
and operation.  Resolving pipeline problems in the short 
term may not be an easy task after many politicians -- 
including leading presidential candidates - and "experts" 
have been quick to demand investigations, fines, 
convictions, or cancellation of the Camisea concession 
contracts. Post will continue to monitor the situation and 
meet with all regulatory agencies after they have finished 
their inspections, OSINERG chief and MEM Hydrocarbons 
director on their return from pipeline inspections.  End 
Comment. 
 
POWERS