The Gasoducto Andino del Sur, or Southern Pipeline, is a 1,000-kilometer pipeline being planned by the government and private companies, and is a central piece of development for Peru’s oil and gas sector. The pipeline would bring gas to one of Peru’s least industrialized regions, and supply the associated petrochemical cluster and several plants planned to add value to Peru’s raw production.

The former Minister of Energy, Carlos Herrera Descalzi, was actively involved in the development of the plans and is cautiously confident about their potential: “Today Peru has around 13 Tcf of proven gas reserves but estimations are that these could reach around 40 Tcf with proper exploration. The gas from Camisea has large amounts of ethane, allowing the construction of a petrochemical plant. This plant will be the first of its kind on this side of the southern Pacific and would have access to the entire regional market.”

The Brazilian troika of Petrobras, Odebrecht and Braskem are leading this megaproject, expected to cost $10 billion. Estimates are that the project will directly increase Peruvian GDP by 1%, and that, given its decentralized location, its “trickle-down effect” will be substantial.

One-third of Peru’s 28 million people live in Lima, and decentralizing industry is seen as a key goal of similar scale projects. Gregorio Neglia Ortiz, general manager of Inspectra, an engineering company which, like many others, hopes to work with the new developments, believes it will “connect the different regions and decentralize business opportunities away from Lima. This is a typical case where dividing the focus of development is in fact multiplying it.”

Sergio Thiesen, the superintendent director of Braskem in Peru, explains: “The pipeline originally planned to supply the petrochemical plant will also support other businesses in the region.”

Decentralization has already begun to take hold in other areas, to wide-reaching effect. Ticiano Muñoz, the general manager of Aprogas, a company that designs and builds integrated gas solutions for industrial and commercial use, says: “In terms of gas installations, the real growth will be seen outside the capital. Just last month we completed the transformation of two platforms in different provinces and I believe that this is the future direction of the market.”

But the project is still very much conceptual, with problems ranging from politico-bureaucratic issues to the technical, social and environmental. Gutierrez points out: “There are no industries to consume gas in the southern region. It is currently cheaper to build such plants in the U.S., which has expertise in the sector, larger quantities of ethane and better prices than Peru.”

Nevertheless, industry leaders are confident that the Southern Pipeline and the petrochemical cluster can become reality, and that the main sticking point will be negotiation between the government and the interested players, of which there has already been no shortage.

Beyond such public-private partnerships, the government is investing heavily in infrastructure on its own account. The largest project is the complete overhaul of Petroperu’s Talara refinery, a strategic asset for the entire sector. Petroperu’s Campadónico says, “The Talara refinery will grow not only in production capacity but also in the quality of its products. We will produce diesel with 50 parts per million of sulfur, increase the processing capacity from 65,000 bbl/d to 95,000 bbl/d and will process heavier oil and deliver greater quantities of lighter products.”

Having secured financial support from Société Générale, Petroperu announced the expansion of Talara’s refinery with great fanfare in May, and it expects it to be an important step toward a more integrated petroleum sector, providing greater capacity for value-added products.