Bloomberg News

Pemex Boosting Security After Deadliest Blast since 2006

February 01, 2013

Pemex Headquarters Explosion Leaves 14 Dead, About 100 Injured

Firefighters and workers dig for survivors after an explosion took place at the so-called B2 building adjacent to the main Pemex tower in Mexico City on Jan. 31, 2013. Photographer: Guillermo Gutierrez/AP Photo

Petroleos Mexicanos is stepping up security at oil production facilities as authorities investigate a blast that killed at least 33 people at the state-owned company’s headquarters in Mexico City yesterday.

Chief Executive Officer Emilio Lozoya Austin, while assuring the incident didn’t hinder output, said disaster investigations are complex and declined to cite any preliminary finding in an interview in the nation’s capital today. The blast also injured 121 at offices where about 10,000 work or visit daily, he said. Security will be boosted at production wells while the probe is conducted, Pemex said in an e-mail. Authorities haven’t said whether the blast was an accident.

“We will use all resources to find out the root causes of the incident” Lozoya, who cut short a trip to Asia because of the emergency, told reporters at a press conference. Pemex is producing 2.55 million barrels of oil today and the headquarters will reopen Feb. 5, he added.

The nation’s deadliest explosion since a mine blast in 2006 comes as President Enrique Pena Nieto, who took office two months ago, 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.

‘No Hypothesis’

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

“We cannot affirm any hypothesis nor can we rule any out,” Deputy Interior Minister Eduardo Sanchez said in a telephone interview from Mexico City last night. The government “will remove every bit of rubble to make sure no one remains trapped,” Interior Minister Miguel Angel Osorio Chong told reporters yesterday, standing in the plaza of the complex.

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 yesterday. 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.

Employee Evacuation

Employees were evacuated from the scene of the blast, some on stretchers, as smoke billowed. The Army cordoned off the Pemex complex and sent in search parties with dogs to look for survivors. The government said it rescued one person from the debris and didn’t know whether more were trapped underneath, after earlier estimating 30 were stuck inside.

The explosion won’t have any financial or economic impact, Lozoya said.

The cost to protect Mexican debt against non-payment for five years with credit-default swaps was little changed at 98 basis points at 2:30 p.m. in Mexico City, 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 the company’s dollar bonds due 2022 rose two basis points, or 0.02 percentage point, to 3.52 percent, according to prices compiled by Bloomberg. The Mexican peso erased earlier losses to rise 0.8 percent to 12.6068 per U.S. dollar.

Shockwaves

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 were destroyed.”

The explosion “seriously” damaged the basement and the first two floors of building B2, Osorio Chong said.

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

Pena Nieto

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

Pena Nieto spent part of this week at an annual 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 performance- based contracts.

Other Incidents

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.

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 more deadly 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 yesterday. “It was lunch hour.”

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.

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


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