Houston Chronicle: Peru's Camisea project an extreme marriage of drilling, ecological care

NUEVO MUNDO, Peru -- Every week, helicopters ferry
more than 5,500 pounds of kitchen scraps from this gritty
natural gas exploration camp deep in Peru's pristine
tropical rain forest.

Developers of the giant Camisea gas fields also fly out
around 7,000 pounds of recyclable plastic and metal and
have established a strict offshore policy that prohibits
workers from contact with the surrounding jungle, as if
they were on an ocean oil rig. The developers even invited
representatives from the Smithsonian Institution to assess
the environmental impact on the area.

"Our plan, basically, is to make sure nothing foreign is
introduced to the jungle as a result of the development of
Camisea," said Murray Jones, the chief environmental
officer for Shell. "The environmental impact as a result of
Camisea will be minimal."

Fuel exploration companies that face intense criticism
from environmental groups because of damage connected
with past projects are going to these unusual ends
because these remote fields are expected to hold gigantic reserves.

Early test wells show that the area has between 11 trillion and 20 trillion cubic feet of natural gas and 600 million barrels of condensates
-- liquid forms of natural gas -- at least seven times Peru's currently developed reserves.

"There's far too much natural gas at Camisea for it to go undeveloped," said Pedro Morales, an official with the Ministry of Energy and
Mines, the Peruvian agency that oversees the Camisea project. "The thing that makes the project different is that, because of the
sensitive location, everyone's watching to make sure it's done right."

Royal Dutch/Shell and Mobil Corp., the companies that form the joint venture developing the area, say at every opportunity that they're
committed to doing just that.

The main reason for concern is the project's location near what has been referred to as the biodiversity capital of the world. In a single
2.5-acre area within Camisea -- a patch of land slightly smaller than half a football field -- observers from the Smithsonian in one four-
month period catalogued, for example, 251 species of trees, 80 types of amphibians, 197 kinds of birds and 51 species of bats.

The area also is home to two native Indian tribes so isolated that the languages they speak aren't related to any other language on Earth.

Shell and Mobil are building schools and clinics for the

native communities, have installed sewer and electric

systems and require any

visitors to the area to

complete a series of 12 vaccinations over a period of

four weeks before traveling there, in order to prevent

outside

diseases from infecting locals.

"There are some people in Shell with a lot of power

who seem very interested in doing the right thing," said

Jose Santisteban, a biologist

with the Smithsonian

who is working on the Camisea project. "Maybe it's just

because it's good and cheap p.r., maybe it's just

because

it's the path of least resistance. But I'm just

glad to have a chance to do the work we're doing out

there. If it wasn't for the gas in Camisea,

we would

never be able to get that far out in the jungle and collect

the data we're collecting. Regardless of the motives, it's

definitely

positive."

The project's organizers look at things in a historical context.

"This is so different from the way things used to work that if my first supervisor were to all of a sudden appear at one of the Camisea
sites, his jaw would drop and his first words would be `What in the hell is going on?' " said Alan Hunt, the director of the Camisea
project, who started working with Shell in 1969. "It's a different world now."

Critics of the Camisea project see Shell's and Mobil's environmental and social claims as an elaborate smokescreen, and say the
people, animals and vegetation around Camisea eventually will pay the price for the project's ambitious production plans.

"There is no way that such a large project can be developed without harming this area to some degree," said Jonathon Mazower, a
spokesman for a U.K.-based group called Survival For Tribal People. "What has to be decided is what is more important here,
increasing the number of lights (in Lima) or preserving one of the few pristine parts left in the world?"

Based on experiences in other places, there is reason for concern.

In Peru, the state oil company, PetroPeru, has been guilty of negligence so severe that the value of its assets -- which ranged from oil
fields to refineries -- had to be slashed by as much as 60 percent when they were privatized due to the high cost of cleaning up the sites.

In neighboring Ecuador, U.S.-based Texaco took part in a widely publicized project that, over a 20-year period, forced thousands of native
Indians to abandon their culture and left part of the Amazon jungle so scarred that the company is facing more than $1 billion in lawsuits
that allege widespread contamination and disease. Texaco maintains that the fault lies with the former Ecuadorian government, and the
two sides are tangled in the courts.

And in Nigeria, in a debacle that has become a measuring stick for ecological disasters, Shell itself has been accused of collaborating
with an abusive government and contamination and negligence so profound that natives of the area filed a $2 billion lawsuit against the
company.

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Peru's Camisea project an extreme marriage of drilling, ecological care

"There are those who see Camisea as Shell's efforts to purify itself after the problems in Nigeria," said Robert David Shaw, a U.S.-based business author who specializes in environmental issues. "These companies have earned people's distrust over the years. Because of that, Shell and Mobil will have to work that much harder to earn their trust when it comes to Camisea." A generation ago, a project like Camisea might have been developed with a fleet of bulldozers to clear the way and a dozen barrels of cheap rum to bribe the locals. But developing concern about the environment outside the industry is resulting in a new style of development. "The industry had to change or die," said Alonso Zarzar, an anthropologist associated with Camisea. "The old ways don't work any more." It's not simply a desire to be an environmental good citizen that forces companies to cast themselves in the mold of the changed business model; it's their bottom line. A spotty environmental record opens the door to boycotts and giant lawsuits. There's also a strong possibility, some analysts say, that companies with clean environmental track records will be given preference in developing projects in sensitive areas. "In the future, companies with questionable environmental records could find themselves fighting legal battles and locked out of negotiations for some lucrative projects," said Shaw. "That's when shareholders start becoming angry." The enormous size of this find presents another problem -- how to deliver and sell all that gas? Camisea's reserves are enough to meet the current natural gas needs in Lima into the 23rd century, which means that before production starts in 2001, the project's organizers must help develop a market for their product almost from scratch. That is so far requiring the organizers to lobby the government to charge low taxes on natural gas and persuading local companies to switch to natural gas from more traditional energy sources such as coal and thermoelectric power. To make things even more difficult, the gas pipeline -- being built by a consortium that includes the Houston office of the Bechtel engineering company -- from Camisea has to take rocky path across the Andes, the highest tropical mountain range in the world, in order to make it to its market in Lima on the Pacific Coast. Estimates are that development of the wells and construction of the pipeline will cost $2.7 billion to $3 billion, and maybe more if branch lines are eventually built to pipe Camisea's gas to markets in La Paz, Bolivia, or Sâo Paulo, Brazil, both of which are much more difficult to reach than Lima. "Even before the environmental concerns of the company, this project is uniquely difficult," said Andrew Vickers, a Shell spokesman. Critics say those difficulties along with environmental concerns should make developing Camisea unattractive. "I don't understand why the company doesn't look at all the difficulties to developing (Camisea) and just say 'It isn't worth the trouble,' " said Mario Nuñez, a lobbyist specializing in environmental issues, who has called for Camisea's development to be halted. "That way, the environment wins. Once the project starts, it's too late." But the government sees Camisea as a way to provide plentiful and inexpensive power that will help develop a large industrial sector and create thousands of jobs, one of the greatest challenges in poor, developing countries like Peru. And Shell and Mobil clearly see the project as profitable despite the obstacles. "What I can't figure out is why environmentalists don't hold this project out as an example," said Hunt, the project's director. "Why don't they challenge other companies to be as proactive as we're being?"
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