By Daisy Johnson
On 6 June 2012, an estimated 30 guerrillas associated with Peruvian insurgent group the Shining Path raided the local pipeline company Transportadora de Gas del Peru’s (TGP) base camp in the Echarate district of south-central Cusco department.
Nineteen gas workers and a helicopter pilot were temporarily held hostage during the attack. The assailants left behind a letter maintaining that they would respect both foreign and national investment projects in the region, but warning workers against collaborating with state security forces.
This appears to be a significant departure from the rebels’ previous position in which they rejected the presence of oil companies in the Alto Huallaga (Upper Huallaga) valley and the Apurimac and Ene River Valley (Valle de los Ríos Apurímac y Ene; VRAE) region.
The incident follows the mass kidnap of 36 Skanksa gas workers on a remote Camisea gas fields project just six kilometres away from the TGP base on 9 April 2012. All hostages were also released on this occasion; however four members of the government security forces were killed in the rescue attempt. This was the first such incident since the mass kidnap of Techint workers in 2003.
The VRAE area is a location of key importance to illegal coca cultivation for processing into cocaine – a trade in which the Shining Path’s remaining combatants are widely believed to be heavily involved. It is also located close to key extractive industry infrastructure, including Peru’s largest gas project, Camisea, and two large gas pipelines connecting the field to Pisco and Lima.
Companies currently operating in the region and involved with the Camisea gas project include PlusPetrol, Hunt Oil, SK Corporation and Repsol.
Oil and gas companies operating in the region are likely to encounter an increasing risk to the security of their personnel, assets and infrastructure. Foreign and domestic NGOs attempting to operate in the VRAE have similarly been subject to intimidation and violent attack.
The new threats made against companies utilising government security forces to protect their operations appears to suggest that the Shining Path may attempt to implement extortion deals with companies in return for protection. Local press suggest that such ‘coexistence’ deals are already in place with various companies in the region.
For example, since a mass kidnapping of Techint workers in 2003, no further attacks have taken place against Techint workers or infrastructure despite the likelihood of regular encounters between technical staff and guerrillas patrolling the region. Similar assertions were made following the release of the Skanksa gas workers in April 2012. However, such claims have not been substantiated.
Companies engaging in ‘coexistence’ deals would encounter substantial legal and reputational risks should they be discovered. However, failure to adhere to the demands of the Shining Path could ensure a greater frequency or severity of attacks, with state security force encampments and especially mobile patrols a favoured target for guerrilla attacks.
Government and corporate responses
The government has refocused its military resources towards the VRAE region in response to recent insecurity. However, the potential efficacy of the army’s ability to interdict its targets is limited by inadequate resources and the insurgents’ advantage of in-depth knowledge of the territory and support from the local community. Furthermore, the guerrillas are allegedly in possession of a wealth of sophisticated weaponry and communication tools purchased with the lucrative revenues they receive from their role in Peru’s cocaine industry.
The Quispe Palomino band, allegedly responsible for both kidnap incidents, predominate over the cocaine trade in VRAE but continue to determine themselves as communist revolutionaries as part of a political organization. They have however distanced themselves from the original Shining Path group that has largely disbanded since the arrest of its leader Abimael Guzman in 1992.
Recent events demonstrate their capacity to instill fear into both the government and those operating in VRAE territory and violence towards government forces continues. However, Shining Path operations are largely localized in the VRAE region and the group are unlikely to have the capacity to extend their reach further in the short to medium term.
The rising risks are unlikely to deter potential investors from operating Peru’s oil and gas sector given the potential rewards on offer. For example, Humala is aiming to exploit vast untapped reserves in both offshore and onshore blocks and oil production is forecast to reach 350,000 barrels per day (bpd) by 2016, according to PERUPETRO estimates, doubling the 2011 production of 153,000 bpd. Accordingly, on 23 April 2012, Peru’s National Agency of Hydrocarbons, PERUPETRO, announced that 22 blocks would be auctioned in the final quarter of 2012 for exploration and exploitation.
Furthermore, the development of the hydrocarbon sector will significantly benefit from a US$5bn investment to fund the construction of a major pipeline and petrochemical plants secured from Brazil’s Petrobras and Odebrecht firms in April 2012.
Nonetheless, companies evaluating operations in affected areas will need to establish stringent security strategies to mitigate the growing risks as well as to establish systems to monitor emerging threats.
Daisy Johnson is a Latin America analyst at Maplecroft