ANALYSIS-Natural gas demand soars in Peru, rate hikes loom

By Marco Aquino

LIMA, Aug 7 (Reuters) - Motorists like Jesus Llanos wait in impossibly long lines to fill their cars with natural gas, a cheap gasoline substitute that people are flocking to because of sky-high global fuel prices.

Though Peru has large gas reserves, it has few pipelines to transport it and only several dozen filling stations in Lima to sell it -- putting President Alan Garcia's government in an uncomfortable position of trying to administer a temporary shortage.

The rise in natural gas demand, combined with a drop in hydroelectric power following light rains, has been so sudden that the government says it may raise energy prices soon to compensate thermoelectric plants that will have to buy costlier diesel.

In the last year or so, total demand for natural gas in Peru jumped 80 percent amid booming economic growth.

"I have to deal with people angry because the line blocks traffic," said Llanos above the shouts of other drivers as he waited his turn at a filling station in Peru's capital.

Peru has 13.4 trillion cubic feet of proven gas reserves, all of which are located in the Camisea natural gas field in the southern part of the country.

And Garcia has said exploration could push reserves up to as much as 20 tcf.

But there is just one pipeline that moves natural gas from Camisea to Lima, and it is running at full capacity. That means there is not enough gas being pumped to fuel thermoelectric plants near Lima, which consume most of the country's natural gas.