Peru LNG Project The liquefied natural gas (LNG) project being developed by Peru LNG S.R.L. (Peru LNG or the Company), consists of the development, construction and operation of a liquefied natural gas plant comprised of a greenfield 4.45 million tons per annum liquefaction train (the LNG Plant) and related marine facilities at Pampa Melchorita south of Lima, as well as a 408-km, 34-inch natural gas pipeline.    The project will liquefy natural gas purchased from Blocks 56 and 88 in the existing Camisea gas fields and sell it to Repsol Comercializadora de Gas S.A. (Repsol CG) for export.  The majority of LNG sales are expected to go to Manzanillo, Mexico, where Repsol CG has signed a 15 year gas sales agreement with Mexicos state power company Comisión Federal de Electricidad (CFE).  Remaining volumes will be sold to international markets, including to Asia and North America. Fit With World Bank Group Strategy:  The Word Bank Groups (WBG) Peru Country Partnership Strategy (CPS) is built upon three strategic pillars to support Perus efforts to increase economic growth and competitiveness, reduce poverty and inequality, and strengthen the countrys public institutions.  Within this overall framework, IFCs strategy focuses on:   - working to reduce Peru''s large informal sector with technical assistance;  - investing and developing projects which address bottlenecks to the provision of basic services and physical infrastructure;  - investing in industries with strong competitive advantages such as agribusiness and tourism;  - expanding growth to new beneficiaries including Small and Medium Enterprises (SMEs), housing, and tertiary education finance, and by building local government capacity to deliver services; and  - supporting sustainable growth, notably in extractive industries, a key sector within the countrys economy.  Specifically, the expected fit between the project and the WBG CPS for Peru is evident in a number of areas.  The project will be developed in an environmentally and socially sustainable manner, i.e. with a minimal footprint during both construction and operation, thereby adequately mitigating environmental impacts, and augmenting social benefits for the surrounding region.  The project will further enhance the countrys gas pipeline infrastructure and provide Peru, as well as the wider regions, first internationally competitive LNG liquefaction facility.  In addition, the significant increase in natural gas production to supply the project will also result in an increase of associated liquids (condensates) which will become available for consumption in Peru, thereby reducing the need for expensive imports and potentially serving as the basis for further development of downstream industries such as petrochemicals.  The project is expected to convert Peru into a net exporter of hydrocarbons after 2010.   Anticipated Development Impact:  This project will support the monetization of hydrocarbons in Peru. While the country has modest reserves of liquid hydrocarbons, it has significant reserves of natural gas. The project will contribute to the development and strengthening of the country''s natural gas infrastructure, and will play a part in satisfying the growing domestic demand for hydrocarbons.  In addition the project will significantly impact both regional and national economic growth over the coming years through a combination of local investment, generation of export revenues, taxes, and royalties.    Looking at the wider region beyond Peru, a majority of Peru LNGs exports are destined for Manzanillo, Mexico, where the gas will be fed into the national grid as a cleaner fuel for electricity generation (replacing fuel oil), and/or domestic consumption, or may also used as feedstock for petrochemical production thereby serving an important development purpose for Mexico as well as Peru.   Specifically, the project is expected to generate the following development impacts:  - Creating Local Employment:  During the planning and construction phases, the project will generate over 5,200 skilled and unskilled, direct and indirect jobs.  During the operating phase, 150 to 200 direct jobs will be created at Pampa Melchorita, with additional jobs being created upstream in gas production, and indirectly through supplier businesses.  From engineers to security personnel and administrative support, a vast majority of the Projects staff will be Peruvian.  Peru LNG expects that over $1 billion of the Project investment will be in local goods and services, primarily centered around the LNG Plant site.   - Contribution to Peruvian Government Revenue:  It is expected that the Government of Peru will receive substantial fiscal receipts in the form of corporate taxes, paid by Peru LNG, as well as royalties and taxes generated from the production of hydrocarbons by the upstream Camisea project.  In the longer term, the average tax revenue generated from the Project alone is expected to exceed $100 million per annum.  Incremental royalties generated by supplying the Project with gas for export are expected to exceed $225 million per annum.  A sizeable portion of these revenues will accrue directly to the regions impacted by this Project and the upstream Camisea project.  - Community Development:  Peru LNG is developing a broad community engagement program in line with its commitment to the sustained economic development of the neighboring communities of Pampa Melchorita, and those located along the Projects pipeline route.  IFC in partnership with Peru LNG are building on the companys existing social development programs to develop new areas for collaboration to enhance local benefits.  Specifically, IFC is exploring projects with the company and sponsors to:   - Improve the companys social investment strategy, and enhance stakeholder participation in its design and implementation through the development of third party evaluation and monitoring capacity;  - Enhance the companys strategy on local procurement to advance the inclusion of SMEs in its supply chain thereby promoting the long term sustainability of local businesses, and contribution to the local economy; and  - Develop a program to further enhance the capacity of local governments in the management and use of tax revenues, in addition to improving social accountability to increase the impact of local public investments.   The key development indicators that are proposed to be monitored during the life of the IFC investment are:   - Annual LNG sales; - Annual taxes paid to the Government of Peru by PLNG;    - Annual direct jobs created; - Annual spending with local businesses; and - Implementation of community development programs including governance capacity.