By Hannah Hennessy In Lima

Critics say the project is a threat to Peru's only marine reserve

In announcing its decision, the Washington-based lender said Camisea was one of the most significant capital investment programmes in Peru's history.

But critics say gas extraction will damage the area's virgin rainforest and isolated tribes, and they also oppose work at the coastal export plant in Paracas Bay, which is near Peru's only marine reserve.

The IADB had delayed its vote on the loan because of environmental concerns, but it said it welcomed a recent Peruvian Government decision to create an environmental commission to monitor Paracas Bay.

Grand project

The project hopes to bring much-needed economic growth to cash-poor and resource-rich Peru.

It plans to extract gas from the Amazon region and pipe it across the Andes to the Pacific, eventually exporting it.

With up to 13 trillion cubic feet of natural gas to extract, the work will cost $3.6bn, but critics say the real cost will be higher.

The bank's loan will help finance a transportation component of the Camisea project.