Peru's pipeline disruption tests industrial resilience; businesses blanch at remote work order

Peru's business groups are clashing with the new interim government over sweeping emergency measures imposed after a rupture in the country's main natural‑gas pipeline triggered the worst energy crisis in two decades, an early test of President Jose Balcazar’s interim mandate weeks before national elections.

The breakdown of Transportadora de Gas del Peru's pipeline, the backbone of the system that supplies nearly half of Peru’s electricity and most of its LPG, has forced widespread gas rationing, pushing up energy prices and exposing long‑standing vulnerabilities in the Andean nation's energy system.

Balcazar, appointed on February 18 after Congress ousted his predecessor, now faces a high‑stakes leadership test. More than a thousand firms have struggled with halted gas production, and business associations have called for the rollback of emergency directives.

Authorities say gas flows may not resume until mid‑March.

The outage could stoke inflation, which has remained among the lowest in the world despite years of political turmoil.

"It can hit inflation, but in a heterogeneous way depending on how energy affects each activity,” said former Economy Minister Alonso Segura.

Inflation reached 0.69% in February and could exceed the 0.81% recorded in March last year, Segura said.

Natural gas is used to produce 70% of the LPG consumed domestically. Some 2.1 million households rely on piped gas and about one million vehicles run on natural gas or LPG.

Peru is the world’s third-largest copper producer.

Former Energy and Mines Minister Carlos Herrera said the rupture underscored Peru’s vulnerability after an alternative pipeline project was canceled in 2017 when the Brazilian construction company Odebrecht was unable to secure financing while being investigated in a case involving bribes paid to secure public works contracts in Peru.

"This crisis highlights the need to diversify the country’s energy matrix," Herrera said. "The serious problem we have is that we haven’t made exploratory efforts for natural gas over time either."

Industry groups said more than 1,000 companies have been affected, with some halting production. Felipe James, head of the National Society of Industry (SNI), said emergency rules allowing firms to switch temporarily to alternative fuels will be costly and not all companies are equipped to make the change.

"Not all can switch... they are not prepared," James said.

On Friday, the government ordered public employees in Lima to work remotely for a week and encouraged private firms to do the same. Schools and universities will shift to virtual classes during the contingency.

Business associations criticized the measures, saying they amount to a partial shutdown of the economy.

"Stopping the country can never be the solution. We demand this decision be reversed," said COMEX, the foreign trade guild.

Peru's mining and energy chamber said it was working "intensely" to mitigate the crisis and seeking to import LPG in "record time."

Spokespeople for the presidency and the Ministry of Energy and Mines did not respond to a request for comment.

The TGP gas pipeline began operating in 2004 and also enables the export of natural gas to Japan, South Korea and China.

-Marco Aquino/Reuters