Peru presidential candidate would tighten control over energy

Lima (Platts)--23Feb2006

Peruvian presidential candidate Ollanta Humala, running second in opinion
polls for Peru's April elections, said Thursday that, if elected, his
government would seek partial ownership of the country's oil and gas 
resources and to renegotiate contracts which "violate" national interests.

     "For us, the issue of hydrocarbons is strategic, first, because the world
is more hungry for energy all the time and international prices cannot be 
calculated in the short term," Humala, a retired army officer who is 
candidate of Union por el Peru, told foreign journalists. 

     "The state has to have sovereign, significant participation (in 
these activities) that make it possible among other things to protect prices, 
[and] the reserves of the country's natural resources," he added.

     A recent rise of 47% in the price of natural gas from Peru's Camisea gas 
project has sparked a heated debate in the presidential campaign about whether
the project, which came on line in August  2004, is bringing real benefits to 
the country. 

     Humala also expressed opposition to a project that would convert Camisea
gas into liquefied natural gas (LNG) for export. "Rather than export natural
gas, what has to be done is supply the domestic market and industrialize the
gas by creating a petrochemical industry that can produce fertilizers,
plastics. In this way, we will create jobs and generate foreign exchange for
the country's educational and health services," he said.

     Humala said decisions on whether the state would have majority or 
minority participation in the so-called strategic activities would be
negotiated on a case by case basis, depending on the activity and taking into
account such factors such as international prices, the state's financial
capacity and scope of the project.

     Humala also said he would promote the participation of local businessmen
in these activities and would give them priority over foreign companies. He 
described the privatization process carried out mostly in the 1990s during 
former President Alberto Fujimori's government as a process that essentially
transferred state companies to foreign hands. 

     On minerals, Humala said his government would renegotiate any contract in
which the  company is not paying royalties or income tax or is violating 
environmental regulations.

		--Mary Powers, newsdesk@platts.com

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