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Hunt Oil, Partners Ink Deal on Peruvian LNG Project

It's not everyday that someone suggests adding Peruvian LNG to your gas supply portfolio, but that's what Dallas-based Hunt Oil may soon be recommending to some West Coast buyers. By 2009, the company and its partners, Spain's Repsol and Korea's SK Corp., hope to be bringing 4.4 million metric tons of LNG per year to the U.S. and Mexican west coasts from a liquefaction plant in Pampa Melchorita, Peru.

The Peru LNG project is a $2.5 billion investment that will take 620 MMcf/d of natural gas from the Ayacucho Mountains through a 250-mile, 32-inch diameter pipeline to the single-train liquefaction plant on the coast south of Lima, where it will be put into tankers bound for the western seaboard of North America.

The companies and the government of Peru held a ceremony on Thursday at Pampa Melchorita with Peru President Alejandro Toledo, Hunt Oil CEO Ray L. Hunt, SK Corp. Senior Vice President Jeong Joon Yu and Repsol CEO Antonio Brufau to dedicate the new project and sign an official investment agreement between the partnership and the government of Peru.

"Peru has always demonstrated compliance with the rules of the game and legal stability, which has allowed this ongoing economic growth", said Carlos del Solar, general manager of Hunt Oil Co. Peru.

"This project represents for Peru an approximate investment of US$2.5 billion and additional revenues for the government of over US$200 million per year in royalties and taxes," said Toledo.

Once completed, the project is expected to add 1% of growth per year to Peru's gross domestic product. During the construction phase, it is estimated that directly and indirectly, Peru LNG will create 35,000 jobs.

The LNG project is the next step in marketing gas from the Camisea development project, which consists of several natural gas fields located in the Ucayali Basin of southeastern Peru. The project has 8.7 Tcf of estimated reserves and adjacent development is expected to access another 3.5 Tcf of reserves.

Camisea production started in 2004 with capacity at 450 MMcf/d of gas and 34,000 bbl/d of gas liquids. Transportadora de Gas del Peru (TGP), a consortium led by Techint, constructed natural gas and NGL pipelines to carry Camisea production to Lima and to a fractionation plant in Paracas. Belgium's Tractebel holds a contract for gas distribution to industrial consumers and gas-fired power plants in Lima. However, gas production from the Camisea project will likely exceed domestic demand for the foreseeable future, so project sponsors would like to export any excess to the North American West Coast.

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