ALGERIA - Sonatrach Moving Into Latin America.

With Spanish speaking Minister Khelil having worked for the World Bank in Latin America and developed good friendships there, Sonatrach in May 2000 entered into a midstream gas JV in Peru. This is moving gas and liquids from the Camisea fields in eastern Peru on Block 88 - on stream since August 2004 - to the western coastal cities of Lima and Callao under a 33-year, $1.45 bn contract with the Lima government signed in January 2001. The JV markets and distributes gas and liquids in the two cities, with twin pipelines built from the field across the Andes mountains by 2004. The gasline, 698 km, has a 6.5 MCM/d capacity. This will eventually be doubled. The 575-km liquids pipeline has a capacity of 7,250 t/d. The JV is owned by two Argentinean firms Techint (30%) and Pluspetrol (19.2%), Hunt Oil of the US (19.2%), Grana y Montero of Peru (12%), Sonatrach (10%), and SK Corp of South Korea (9.6%). Techint is the operator and Sonatrach is the engineering adviser. Sonatrach is negotiating a 40-year participation in Camisea's $1.6 bn development JV. The Camisea consortium is to have another gas block and a 4m t/y LNG plant at Pisco for export to Mexico and the US West Coast by 2007 or 2008.

The Peruvian Deputy Energy and Mines Minister Juan Miguel Cayo is seeking new investment in the country's petroleum sector, especially towards the south-eastern jungle area near the Camisea gas fields. Although Peru's crude oil output has dwindled in recent years, the start of the Camisea gas project in 2004 - nearly 20 years after it was discovered - has sharply increased output of both gas and NGLs. "This is an area where there is a lot of gas", Cayo told Dow Jones Newswires in an interview published on Feb. 2, 2005.

Camisea's gas fields in Block 88, inaugurated in August 2004, holds 8.7 TCF of proven gas reserves, and the surrounding areas are largely unexplored. Oil and gas exploration activity increased in 2004 thanks to more flexible contracts and a more attractive royalties scheme. Cayo said the trend will continue this year. The government has said that 2004 gas output reached 30.36 BCF, up 64% from 2003. Peru produced 34.45m barrels of oil and other hydrocarbon liquids, up 3.3% on 2003. In a bid to find new players, Peru's Energy and Mines Ministry recently signed a memorandum of understanding with the state-owned China National Petroleum Corp. (CNPC). This was one of a series of agreements signed last month during a visit by Chinese Vice-President Zeng Qinghong.

Cayo said development of Block 56, near Camisea, will go ahead despite problems with the local communities. Last September, the government awarded the contract to develop Block 56 to the same consortium that is developing the upstream phase of the Camisea project on Block 88. Camisea's Block 88 will generate from royalties about $300m in 2004-07.