Peru government says it will find replacement for Odebrecht on pipeline in January

11/28/2016

LIMA (Reuters) -- Peru's President Pedro Pablo Kuczynski said that he expects to find a company in early January to replace Brazilian engineering conglomerate Odebrecht SA as the builder and operator of a proposed $5 billion natural gas pipeline.

Sempra Energy announced on Wednesday that it had dropped its offer to buy Odebrecht's majority stake in the project, leaving junior partners scrambling as the government eyes a new auction. Odebrecht must fully exit the project as a condition of banks that would finance its construction.

Kuczynski reiterated that his government would not strip an anti-corruption clause from the pipeline contract, a request made by Sempra amid concerns it would be left on the hook for any wrongdoing committed by Odebrecht. Odebrecht is at the center of the biggest-ever graft scandal in neighboring Brazil and its pipeline contract is under investigation in Peru.

The clause "is in all concessions that Peru has. If you don't want to sign it, get out of here!" Kuczynski told a crowd of cheering supporters in comments broadcast on state TV.

"We're working and I expect that by the beginning of January we'll have a replacement and the pipeline will be built no matter what," Kuczynski added.

Kuczynski, a 78-year-old former investment banker who took office in July, is eager to push out infrastructure projects as part of his promise to jumpstart economic growth. His government is also striving to shore up its anti-corruption credentials after his adviser was ousted for appearing to plot corrupt deals in leaked audio.

Peru's energy and mines minister told Congress late on Thursday that the anti-corruption clause would not make a new company liable for any wrongdoing by Odebrecht.

This week the government announced that China National Petroleum Corp discovered 3.9 trillion cubic feet of proven natural gas reserves that could feed the future pipeline, possibly easing worries that there would not be enough demand for its use.

"That's a whole lot of gas!" Kuczynski said.

Reporting by Mitra Taj; Editing by Chizu Nomiyama and Dan Grebler