By Jean Luis Arce LIMA, Dec 21 (Reuters) - Peru, a sizable oil producer in the 1970s, is rediscovering its energy export potential but its natural gas output may end up like its gourmet coffee beans -- in abundance abroad, hard to find at home. Peru, which aims to export natural gas to Mexico from 2010 and eventually to the United States and Chile, is failing to tap its reserves for domestic use and put an end to pollution-belching oil-powered buses, cars and factories. "The conversion to gas in industry has been limited and the conversion for domestic use is almost nil," Cesar Gutierrez, president of state energy company PetroPeru, told Reuters. Since Peru's Camisea gas field began pumping gas to Lima in August 2004, politicians and business leaders have praised gas as giving the nation energy independence and a cleaner future. But Peru, a mountainous country twice the size of Texas, only has one pipeline to transport the gas and the private sector has not stepped up to promote more, despite reserves that would cover nationwide consumption for two decades. Many of the vehicles on Peru's roads date from the 1980s and run on dirty, high sulfur content gasoline and diesel that the Andean nation produces. Peruvians are eager to change to cheaper natural gas, but few highway stations oblige. At around $1,200, the cost of converting a vehicle to natural gas from gasoline is high and many criticize the government for not providing proper subsidies. "There are very few places to fill up at, especially outside Lima, and the queues are often long," said bank executive Mario Quispe, filling up on natural gas in Lima. Peru has almost 12 trillion cubic feet of proven gas reserves. Potential new deposits could lift its deposits to 37.6 trillion cubic feet, according to government data. COLOMBIA INSPIRES That makes Peru one of South America's principal gas producers along with Venezuela, with 150 trillion cubic feet of reserves, and Bolivia, with almost 50 trillion cubic feet. Still, Colombia, with around 7 trillion cubic feet, has done a much better job of developing its natural gas for local use and cutting its greenhouse emissions, analysts say. Gutierrez of PetroPeru blames French conglomerate Suez <LYO.PA>, which has exclusive distribution rights for the Camisea gas reserves in Peru, for not doing enough to allow more factories, restaurants and households to use local gas. "Suez' vision is very European and focused on big clients, it has a lot to learn from Colombia," Gutierrez said. "In Colombia they have sold gas inventively and have successfully focused on low-income consumers. When customers asked for gas connections, they also gave them gas cookers for free. They created a market, they created demand," he added. Suez declined to comment on Gutierrez' remarks but said it has a network of 38,000 potential domestic clients in Lima, of which 5,000 have operating gas connections. Lima is home to some 8 million people, almost a quarter of the country's total population. Andean cities such as Cuzco, Arequipa and Puno are also keen to receive piped natural gas. Gustavo Navarro, oil and gas director at the energy and mines ministry, said that while progress has been slow, Camisea projects for the domestic arena are about to "spark up." "The huge local demand will create gas for electricity production, petrochemicals, Gas To Liquids, liquefied gas for the home market and many other things," Navarro said, although he declined to say who would provide the infrastructure. WRONG DIRECTION? So far, the Peruvian government has diverted attempts to move Peru toward natural gas by promoting liquefied petroleum gas, a mixture of propane, propylene, butane and butylene. While LPG is a cleaner-burning fuel than traditional gasoline, Peru needs to import it at a time when it has ample natural gas reserves. LPG is expected to become Peru's second-most popular fuel after diesel next year, the government says, while conceding that domestic energy policy needs to be more gas-focused. "Our great challenge is to promote natural gas, to inform decision-makers and politicians and not to take the wrong (energy) course," Navarro said.(Additional reporting by Robin Emmott)
