Peru rules out coastal pipeline pushed by Suez

By Teresa Cespedes

LIMA, July 9 (Reuters) - Two U.S. companies are poised to build a natural gas pipeline in Peru's Andes after the government said on Wednesday it ruled out a Pacific Coast pipeline proposed by France's Suez Energy (LYOE.PA).

Suez Energy had told the government it would invest $850 million in a coastal pipeline from Peru's Camisea field. Later, it said it was willing to be flexible over where it would build.

Kuntur Transportadora de Gas, owned by U.S. investment fund Conduit Capital Partners and Energy Transfer Partners (ETP.N), proposed building a potentially more expensive pipeline in the Andes to serve some of Peru's poorest communities.

"Suez has been told the southern pipeline in the mountains has priority ... and that it is not economically viable to build two pipelines at the same time," Mining Minister Juan Valdivia told Reuters.

"With this, we are left with the two other companies," he said.

Regional leaders in southern Peru had threatened protests if the government did not abide by a law that requires the pipeline to be built in the mountains.

"We hope the two companies will move forward together in the project, because it is not our intention to have two pipelines in the same place," Valdivia said. "This is something the companies need to decide."

Analysts say there is not sufficient demand to support more than one pipeline. (Reporting by Teresa Cespedes; Writing by Dana Ford; Editing by David Gregorio)