Bloomberg News

Pemex Combs Rubble for Cause of Deadliest Blast Since 2006

February 02, 2013

The probe into a blast that tore the face off a building at Petroleos Mexicanos’s Mexico City headquarters and killed at least 33 people continued, with authorities saying they still don’t know what happened.

Forensic, chemical and explosive experts were sifting through clues and haven’t identified the cause of the disaster at the state-owned oil company’s office on Jan. 31, Attorney General Jesus Murillo Karam said yesterday. Pemex has stepped up security at oil production facilities during the investigation, the company said.

The government will update on the cause no later than tomorrow, Murillo Karam told reporters at a news conference. He added there weren’t signs of any fire sparked by the explosion. “The federal government is determined to find the truth of this incident whatever it may be, whether it involves an accident, whether it involves negligence, whether it involves an attack.”

The nation’s deadliest explosion since a mine accident in 2006 comes as President Enrique Pena Nieto, who took office Dec. 1, plans to submit a bill to increase private investment in the energy industry and lower taxes on Pemex, the nation’s largest company by revenue and the world’s fourth-biggest crude producer. The initiative is set to be the biggest energy- industry overhaul since the nation seized oil fields from British and U.S. companies 75 years ago. Pena Nieto declared three days of national mourning after the incident.

Pemex Output

Pemex Chief Executive Officer Emilio Lozoya, who took the helm of the oil producer two months ago, told reporters at a yesterday that the incident didn’t hinder Pemex output, the company is producing about 2.57 million barrels of oil daily and the headquarters will reopen Feb. 5. after a three-day federal holiday weekend commemorating Constitution Day.

The blast also injured 121 at offices where about 10,000 work or visit daily, Lozoya said.

Investigators from the attorney general’s office, the Defense Ministry, the Navy and the National Autonomous University of Mexico are working on the probe, Lozoya said.

The nation’s civil protection teams, and federal investigators remain working this morning at the blast site, Pemex said today on its Twitter page.

Shattered Windows

Milenio TV reported that the incident may have been caused by an implosion due to halon gas, a fire suppressant chemical that the network said Pemex was storing after taking the gas offline amid global bans because of the threat it poses to the environment. Milenio didn’t say where it got the information. Murillo Karam said that while he couldn’t confirm whether halon was found at the scene, an implosion has been ruled out.

Footage on Milenio TV showed shattered windows and gaping holes in walls on several floors after the blast rocked the B2 building adjacent to the company’s main office, the second- tallest tower in the country, between 3:40 p.m. and 3:45 p.m. local time on Jan. 31. Security personnel surrounded the complex and roped off the area outside, where dozens of ambulances were parked and a bust of the late President Lazaro Cardenas, who nationalized Mexico’s oil industry in 1938, stood intact.

Employees were evacuated from the scene of the blast, some on stretchers. The Army cordoned off the Pemex complex and sent in search parties with dogs to look for survivors. Televisa TV network reported the condition of seven injured as “very grave” as of last night.

Economic Impact

The explosion won’t have any financial or economic impact, Lozoya said in an interview yesterday after the news conference with journalists in Mexico City.

The cost to protect Pemex debt against non-payment for five years with credit-default swaps was little changed at 115 basis points yesterday, according to data compiled by Bloomberg. Credit-default swaps pay the buyer face value if the issuer fails to comply with debt agreements.

Yields on Pemex dollar bonds due 2022 rose three basis points, or 0.03 percentage point, to 3.53 percent, according to prices compiled by Bloomberg. The Mexican peso erased earlier losses to rise 0.8 percent to 12.6062 per U.S. dollar.

Leticia Vigueras, who was working on the second floor of the adjacent B1 building, said she felt a burst like a shockwave as the windows shattered.

“From the magnitude of the damage, it’s hard for me to think it was an accident,” said Vigueras, 38, a finance department employee who said one of her co-workers was killed and another is missing. “The whole structure of the first floor and mezzanine was destroyed.”

Basement, Floors

The explosion “seriously” damaged the basement and the first two floors of building B2, Interior Minister Miguel Angel Osorio Chong told reporters on Jan. 31.

The blast may have been related to maintenance deficiencies in the boilers used for power generation and air conditioning, Mexico City-based newspaper El Universal reported, citing Moises Flores, the leader of one of Pemex’s unions.

Pemex said on its Twitter account on Jan. 31 that an electrical failure had prompted a preventive evacuation of the headquarters. Lozoya declined to comment on the bad equipment report.

“We’re going to dedicate ourselves as much as possible to first know what happened,” Pena Nieto said from the explosion site when he toured the area hours after the blast. “If there are people who are responsible in this case, we’ll put the full weight of the law on them.”

National Mourning

After visiting yesterday with people injured in the blast, Pena Nieto declared three days of national mourning, saying the incident has filled Mexico with sadness.

Pena Nieto on Jan. 30 spoke at a conference for his Institutional Revolutionary Party, promoting his proposed energy-industry overhaul in a bid to stem production declines at Pemex. While he’s promised not to privatize Pemex, he’s also pledged to forge ahead on a modernization that would allow more non-government investment and boost competitiveness.

The government undertook some overhaul efforts with Pemex under the previous administration. In 2008, then-president Felipe Calderon pushed through a bill that allowed outsourcing production projects through performance-based contracts.

At least three other incidents have caused significant casualties at Pemex in the past five years. A fire at a gas distribution hub near the U.S. border left at least 30 dead last year, and 21 workers were killed in 2007 when an oil rig hit a drilling platform in the Gulf of Mexico.

Domestic Product

In addition, an explosion prompted by a criminal gang attempting to steal oil from a pipeline in the state of Puebla killed 28 in 2010. Mexico has been wracked by drug violence since Calderon sent troops to fight the nation’s organized crime groups after taking office in December 2006. The drug war resulted in more than 58,000 deaths during his term, and his government estimated it shaved one percentage point annually off gross domestic product.

Milenio newspaper reported that between 2008 and 2011 Pemex requested funds to update disaster-prevention equipment, such as smoke detectors, at its headquarters. The government repeatedly denied those requests, Milenio said.

The explosion could have been even deadlier at other times of day.

“At the time of the blast many Pemex employees, including my staff and those of other board members, were out” board member Fluvio Ruiz said in an interview on Jan. 31. “It was lunch hour.”

Pemex Reform

The Pemex facilities are “very well maintained,” leaving a “low probability” of accidents at the site, Sergio Flores, a former Pemex employee who teaches architecture at Mexico’s National Autonomous University in Mexico City, said in an interview.

Barclays Plc said in a note to clients yesterday that the explosion is “very unlikely” to have been caused on purpose.

“We believe that if the blast is proved to have been an accident, it should not affect discussions on Pemex reform,” Marco Oviedo, Barclays analyst, wrote in the note.

Tomas Torres, vice-coordinator of the Green Party in the lower house of congress, said the incident will probably intensify debate over Pena Nieto’s plans to overhaul the oil industry.

“Positions may harden,” Torres said in a telephone interview from the central state of Queretaro. “It could be an element that strengthens the argument to invest in, modernize and take care of” Pemex, although those opposing changes may lobby against “using the pain of the families who died there for political reasons,” he said.

To contact the reporters on this story: Carlos Manuel Rodriguez in Mexico City at carlosmr@bloomberg.net; Brendan Case in Mexico City at bcase4@bloomberg.net; Nacha Cattan in Mexico City at ncattan@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net; Andre Soliani at asoliani@bloomberg.net


Hollywood Goes YouTube
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus