Washington, D.C./Lima, February 5, 2008
— The Board of Directors of IFC, a member of the World Bank Group, on Tuesday approved financial and advisory support for Peru LNG, a natural gas export project that will support growth in some of Peru’s poorest regions and will be the largest foreign direct investment in the country’s history.
Totaling $3.8 billion, this landmark investment is the first liquefied natural gas export project in Latin America. It is expected to transform Peru into a net hydrocarbon exporter after operations begin in 2010. In addition to the $300 million loan approved today, IFC is advising Peru LNG on optimizing the project’s environmental approach and ensuring that local communities benefit.
“We very much value IFC’s support in helping us develop a project that follows best practice environmental and social standards and that extends the investment’s development benefits to the Peruvian people,” said Steve Suellentrop, President of Peru LNG.
The project consists of an LNG plant and a marine loading terminal 170 kilometers south of Lima on Peru's central coast, as well as a new 400-kilometer pipeline that will connect to an existing pipeline network east of the Andes. The gas is expected to be sold to overseas markets.
Peru LNG will help generate significant annual tax and incremental royalty payments to the Peruvian government, equivalent to over 1.5 percent of current state revenues. The project will also support the regional economy through local purchasing of goods and services. The company and IFC are developing a community development program in line with Peru LNG’s commitment to sustained economic development.
“In Peru LNG we have found a partner who shares our commitment to supporting economic development through private sector investment,” said Somit Varma, IFC Director and Global Head for Oil, Gas, Mining, and Chemicals. “IFC plays an important role in helping ensure that project benefits reach the people that need them most.”
IFC will help the company purchase goods and services from local small and midsize companies. IFC will also support local authorities in efficiently managing and allocating incremental royalties resulting from the project. IFC seeks to extend local engagement in the project by giving community members opportunities to evaluate the company’s environmental and social performance.
The approval by IFC’s Board followed extensive consultation by IFC staff with affected people and civil society organizations.
The Peru LNG project consortium is headed by Texas-based Hunt Oil Company and includes Spain’s Repsol YPF, SK Energy of South Korea, and Marubeni Corporation of Japan.
About IFC
IFC, a member of the World Bank Group, fosters sustainable economic growth in developing countries by financing private sector investment, mobilizing private capital in local and international financial markets, and providing advisory and risk mitigation services to businesses and governments. IFC’s vision is that poor people have the opportunity to escape poverty and improve their lives. In FY07, IFC committed $8.2 billion and mobilized an additional $3.9 billion through syndications and structured finance for 299 investments in 69 developing countries. IFC also provided advisory services in 97 countries. For more information, visit
www.ifc.org
.
Since Peru joined IFC in 1956, IFC has provided over $1.2 billion to more than 50 private enterprises in the country, including $300 million in syndicated loans. In fiscal 2007 (July 2006 to June 2007), IFC invested $247.7 million in the country’s priority sectors. As of June 2007, IFC’s committed portfolio in the country reached $463.9 million.
IFC’s strategy in Peru addresses private sector challenges, with a focus on fostering sustainable development. Key sectors include financial, microfinance, infrastructure, agribusiness, and tourism. Promoting access to finance for small and medium enterprises and housing is also at the core of IFC’s strategy. IFC provides added value to clients in extractive industries, helping raise social and environmental standards and increase impact in local communities.
