PERU: Fresh Evidence of Construction Problems in Camisea Pipeline

Techint, the Argentine company that built the Camisea pipeline which carries natural gas from Peru's Amazon jungle region to a port on the country's Pacific coast, used unqualified welders, in a clear violation of international norms, according to a new report by E-Tech, a California-based non-profit engineering and environmental consultancy firm.

The report came out just as the Peruvian government of Alan García, which took office Jul. 28, has engaged in talks with Transportadora de Gas del Perú (TGP), to review the contract with that consortium, which is in charge of the controversial 731-km pipeline.

TGP is made up of the Argentine firms Techint and PlusPetrol, Hunt Oil from Texas, the Algerian state-owned oil and gas company Sonatrach, South Korea's SK Corporation and several other firms.

The pipeline leaked five times in less than two years, from late 2004 to March 2006, prompting an outcry against TGP and forcing the government of former president Alejandro Toledo to order an audit to investigate the leaks.

During his campaign, García promised that he would review the contract with TGP in order to adopt new sanctions and force the consortium to come up with real solutions to the frequent ruptures that have brought the flow of gas to a standstill.

Executive director of E-Tech International, Bill Powers, the author of the new report on the pipeline, told IPS that unlike the first audit that the independent consultancy put out in February, which was based on testimony from former TGP technicians and employees, the new one presents documents and photos substantiating what was asserted in both reports: that shoddy construction is to blame for the repeated leaks.

One of the most important documents presented by E-Tech is a "nonconformity report" by a field inspector with Gulf Interstate Engineering (GIE), a consultancy firm hired by Techint.

The nonconformity report states that after inspecting 26 welds along a 300-metre stretch of the pipeline, the inspector found that unqualified welders had been used, in contravention of the American Petroleum Institute's (API) international code and the specifications of the Camisea project.

The nonconformity report includes a portion where the contractor -- in this case, Techint -- is to describe the measures to be taken to remedy the problem. But that part of the document was never filled in.

The new E-Tech International audit provides photos which show other serious defects, such as stretches of pipeline that were hastily and only partially covered over with dirt, between kilometres six and 10; pipes that were exposed for a long time to the elements before they were put in the ditches, between kilometres three and six; and pipes that can be seen to be laying in water and rusting, at kilometre 90.

In addition, the report provides copies of original documents that describe changes to the pipeline's route that were implemented without any previous studies or evaluations of the impact.

E-Tech's first report, in February, stated that Techint used pipes left over from projects in Brazil and Ecuador, which were corroded from being stored outside and suffered further damage when they were transported to Peru.

Minister of Energy and Mines Juan Valdivia told IPS that he would ask the company that is to audit the TGP pipeline -- to be selected on Sept. 12 as part of an international bidding process -- to take E-Tech's conclusions into account.

"The auditing company must evaluate whether these accusations are real," said the minister. "It must take into account in its study all of the elements mentioned in the (E-Tech) report. Furthermore, I have asked the Ministry's hydrocarbons department and the commission in charge of the Camisea case to provide a report on the new findings."

Valdivia also said that in light of the new information revealed by E-Tech International, the government will evaluate the need for more stringent audit requirements.

With respect to the negotiations with TGP for a review of the contract, the minister said "we are not currently looking at the construction of the pipeline but at what will occur now that the gas supplies have been cut off. Only after the results of the audit that is to be carried out will the issues that emerge from the study be dealt with."

But José Carrasco of the governing APRA party, who served as minister of energy and mines in García's first administration (1985-1990), told IPS that the new E-Tech report underscores the need to review the contract with TGP and postpone the audit.

"With the new elements revealed by the consultancy (E-Tech), the audit of Camisea that the state is going to commission should be postponed, in order to incorporate the new terms of reference. It must be a comprehensive audit, that would include a request for information from GIE, whose inspectors found that unqualified welders had been employed," said Carrasco, chairman of the congressional Energy and Mines Commission.

The commission plans to summon Minister Valdivia to ask him to take the E-Tech findings into account in the audit to be commissioned by the state.

In response to IPS, which sent the E-Tech report to TGP, asking for comments, the consortium's general manager Ricardo Ferreiro said "The new report discredits and questions not only TGP but other entities that have reliably investigated the denunciations presented".

"TGP has maintained, and continues to maintain, that only a technical audit.will clear up all of the doubts" about the Camisea pipeline, he said.

Ferreiro added that no one was more concerned about the issue than TGP, and that "we all demand rigour in this process and we must cooperate with it because the country's most important energy project is at stake."

When E-Tech's first report came out in February, TGP, the Ministry of Energy and Mines, and the energy investment supervisory body (OSINERG), refuted the consultancy firm's assertion that unqualified welders had been employed to work on the pipeline.

"They tried to discredit our report, but we continued to investigate," Powers told IPS. "The document we obtained is the undeniable proof that we were not lying: unqualified welders were used on the pipeline, which is absolutely prohibited anywhere in the world."

"Techint said all of the welders were duly qualified before receiving authorisation to work on the project," he added. "If the company that built the pipeline says they were qualified, then are we talking about the likelihood that they had false certificates as weldersà? In whose hands was the construction of the pipeline put?"

On Mar. 4, the indigenous community of Kepashiato in Peru's Amazon jungle region directly suffered the consequences of the fifth rupture in the pipeline. Several houses caught on fire and two people were burned when an explosion occurred.

Then prime minister Pedro Pablo Kuczynski immediately stated that the explosion was the result of sabotage, and said it was suspicious that E-Tech had just predicted that more accidents would happen in the future.

Kuczynski, who from December 2002 to February 2004 sat on the board of directors of Tenaris, a subsidiary of Techint, then decided to order an independent audit of the pipeline. But five months later, no company has yet been selected to carry out the investigation.

In June, a congressional investigatory commission concluded that irregularities were committed during the construction process and recommended that the quality of the pipeline be studied. The commission's report is now pending approval by the new legislature, which was sworn in on Jul. 28.

Alfredo Dammert, president of OSINERG, which is in charge of supervising TGP operations, told IPS that the use of unqualified welders was probably an "anomaly" that occurred in the first phase of the project and was later remedied.

"When we stepped in to supervise, we didn't find that problem," said Dammert. "What might have happened is that in the first stage of construction, there may have been errors or shortcomings that were corrected when detected by the consultancy firm (GIE)."

"Independently of what the report says, we have always stated that when we began to monitor the work, there were things that we were not satisfied with, which is why fines were charged. When the company has fallen short, it has been fined, and has also had to correct any shortcomings. And the company has also been asked to take on more supervisors," he added.

Dammert said he agreed with some of the recommendations made by E-Tech, such as an audit of the welds along the entire length of the pipeline. He also acknowledged that OSINERG only checked a few parts of the pipeline.

Powers said he would send a copy of E-Tech's second report to the authorities in Peru, "so they understand that it is necessary to look into this question in an in-depth manner."

• 183 Environment
• 208 Regulation