Cusco holds S/ 12 billion in unexecuted gas royalties as natural gas access remains limited despite production wealth

Cusco has accumulated over S/ 33 billion in gas royalties and over-royalties since production began at the Camisea field in 2004, yet approximately S/ 12 billion remains unspent in government accounts, according to Rogers Valencia, president of the Cusco Institute of Economics. The region has utilized only S/ 20 billion of the total received, with execution failures concentrated at the district municipality level, which accounts for more than 60 percent of the 6,800 paralyzed works. Valencia warned that projects abandoned for more than eight years have minimal prospects for reactivation due to cost escalation beyond original budgets, requiring authorities to acknowledge which infrastructure can be salvaged.

The Cámara de Comercio de Cusco reports the region receives between S/ 1,000 million and S/ 1,200 million annually in gas royalties, with approximately S/ 400 million going unexecuted each year. Gas royalties represent over 80 percent of Cusco’s total canon income when combined with mining royalties of S/ 220 million to S/ 230 million. The district of Megantoni in La Convención province exemplifies the dysfunction, receiving over S/ 300 million annually in gas royalties yet ranking among the lowest nationally in public spending efficiency despite being the second-highest recipient district after San Marcos in Ancash.

Natural gas reaches Cusco households only marginally, and the region pays the country’s highest electricity rates except for Madre de Dios. Only 4,000 vehicles have converted to natural gas, representing negligible penetration. The absence of gas infrastructure for industrial sectors, particularly brick manufacturing, has elevated pollution levels from combustion of dirty fuels, causing health issues including pulmonary fibrosis and bronchitis. Valencia noted Peru increased energy consumption 2.5 times thanks to Camisea gas, but dependence on a single transport pipeline creates vulnerability, with the TGP pipeline failure costing 1 percent of national GDP or approximately $3.5 billion. Effective gas massification requires a unified gas tariff, viable residential concessions, supply security for industry, permanent trunk infrastructure combining state-backed financing for pipeline construction, and integration of regional networks under public good principles.