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    Spain's Enagas Takes Peru to Arbitration


The Spanish gas grid operator began arbitration proceedings against Peru earlier this month yet, 18 months since the dispute was triggered, still claims it can be amicably settled.

by: Mark Smedley

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Natural Gas & LNG News, Americas, Europe, Corporate, Litigation, TSO, Infrastructure, Pipelines, News By Country, Peru, Spain

Spain's Enagas Takes Peru to Arbitration

Spanish gas grid Enagas has said it began arbitration proceedings against Peru earlier this month over the termination of the Gasoducto del Sur Peruano (GSP) pipeline concession in which it had a 25% stake. 

The company had made no reference to the arbitration referral in its 1H2018 results press statement July 17.

The GSP concession was terminated by the Peruvian government January 23 2017 after its leader Brazilian engineering group Odebrecht failed to satisfy Lima that GSP would be adequately financed. Odebrecht was hit financially by a corruption scandal linked to several Latin American politicians, including two ex-presidents of Peru who were put under investigation.

In its longer presentation to investors also issued July 17, Enagas said it filed the request for arbitration against Peru on July 2 before the International Centre for Settlement of Investment Disputes (ICSID), the World Bank arbitration tribunal in Washington DC, adding that it refers to the terms of a Peru-Spain inter-governmental agreement on the reciprocal protection of investments.

Enagas said it had at least six months of direct negotiations with the Peruvian government, prior to making the arbitration referral, without being able to reach an amicable agreement.

It remains "confident that an agreement will be reached to end the arbitration started and, to this purpose, remains at the disposal of the Republic of Peru to enter the necessary negotiations to reach an amicable solution." It cited its own expert reports as indicating that Enagas could recover its investment in GSP within an estimated period of three years. 

Peruvian newspaper El Comercio reported July 9 that Enagas is seeking to recover $511mn that it invested in GSP, and that the arbitration referral comes at an embarrassing time for the government, as Peru's energy and mines minister Francisco Ismodes recently revealed that preparations were underway to relaunch GSP in a more cost-effective manner, and that details would be announced at the end of 2018.

The Peruvian president who ordered the GSP concession to be terminated, Pedro Pablo Kuczinsky, resigned March 21 2018 after less than two years in office in the face of corruption allegations, and was succeeded by his first vice-president first vice-president Martin Vizcarra.