November 19, 2016 / 4:16 PM / 2 years ago

Peru eyes new auction for natgas pipeline contract in 2017-govt

LIMA, Nov 19 (Reuters) - Peru will hold a new auction for a natural gas pipeline project next year if financing for a project controlled by the Brazilian engineering company Odebrecht remains snagged on corruption concerns, the finance minister said Saturday.

Odebrecht, ensnared in a massive corruption scandal in neighboring Brazil, must exit the $5 billion Gasoducto Sur Peruano project as a condition of banks that would provide a $4.1 billion syndicated loan for construction on the project.

But Odebrecht’s attempt to sell its 55 percent stake in the project has faced several repeated delays.

“This is a great opportunity for Peru to auction the project again. We think we’ll do it relatively quickly, it’s a very attractive project,” Thorne told reporters, adding that the government would not legally be able to take control of the contract until January.

The current contract was designed during the previous government of Ollanta Humala to transport natural gas from Peru’s abundant Camisea fields to the Pacific coast, where it would feed power plants and a future petrochemical complex.

Thorne said the government of President Pedro Pablo Kuczynski, who took office in July, would probably modify the project so it also transports gas to cities in Peru’s southern Andes and so it is not financed through consumer electric bills.

Reuters reported on Friday, citing a government source, that the government might revoke the pipeline contract so it could hold an auction to find a new builder and operator.

Construction on the pipeline was about a third finished in July. Odebrecht has not responded to requests for comment on Friday and Saturday.

Odebrecht won the rights to build the pipeline in 2014 after its sole competitor - a group led by U.S.-based Sempra Energy - was disqualified the day of the auction for making last-minute changes to the share each company held in the consortium.

Public prosecutors and the comptroller have been investigating possible wrongdoing in the bidding process.

This year Sempra Energy has offered to buy Odebrecht’s stake in the project, but it wants the government to remove a clause from the contract that would hold it liable for any corruption during the awarding of the project, the government source said.

Thorne reiterated the government would not strip the clause from the contract.

“We’re firm on the fight against corruption. We don’t know if there was any or wasn’t...but what we won’t do is offer any protections,” Thorne said. (Reporting By Mitra Taj; Editing by Alistair Bell)

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