Peru May Terminate Pipe Concession

The consortium behind Peru’s main gas pipeline concession has acknowledged the government may terminate its concession later January 23.

Gasoducto Sur Peruano (GSP) -- a joint venture of Brazil’s Odebrecht, Spanish gas grid operator Enagas and long-established Peruvian engineer Grana y Montero (GyM) -- acknowledged in a statement January 20 that the concession comes to an end January 23 and may not be extended by the government.

Odebrecht, under investigation in Brazil as part of the Petrobras scandal, has been looking to exit the consortium since April 2016. Reports last month indicated that Spain’s Enagas was still looking to raise its GSP stake from 25% to 30% and GyM from 20% to 30%, with Odebrecht then selling the remainder to New York fund Brookfield.

However, Enagas said January 20 there was no possibility it and GyM could complete such a deal prior to January 23, the date when the concession expires. Enagas noted January 23 that credit rating agency Standard & Poor's had said it would not change its rating or outlook for Enagas because of the possibility that the Peruvian Government may terminate the GSP concession.

The Peruvian government has been critical of GSP, which flows gas from the Pluspetrol-operated inland Camisea field to the Hunt Oil-operated Peru LNG complex on the coast, saying that it has not expanded its activities in recent years to route gas to enough Peruvian businesses.

Odebrecht and Enagas, then with 75% and 25% stakes, secured a 34-year concession to run GSP in 2014 but was expected to miss a key financing deadline January 23 related to the concession; the sale of its now 55% stake is likely to have aided that financing.

Mark Smedley