Bloomberg News

Mexico Says Gas Buildup Caused Deadliest Blast Since 2006

February 05, 2013

Mexico Says Gas Buildup Caused Deadliest Blast Since 2006

An explosives expert inspects the site of the blast at the Petroleos Mexicanos headquarters building in Mexico City. Photographer: Susana Gonzalez/Bloomberg

Mexican authorities said a buildup of gas led to the blast last week that killed 37 people at Petroleos Mexicanos’s headquarters, the first official attempt to explain the nation’s deadliest explosion since 2006.

Investigators are still probing whether it was an accident or someone’s intentional act, Attorney General Jesus Murillo told reporters at a press conference in the nation’s capital last night. Authorities have early indications that the Jan. 31 incident involved the detonation of a methane gas leak in the basement of the building B2 in Mexico City, and there were no signs of any explosives at the scene, he said.

“An accumulation of gas that was combined with a spark from an electrical system in the building provoked this tragedy,” Murillo said. “We still need to go through a lot of steps in order to determine the precise gas that generated the explosion, its exact point of origin and the analysis of whether there are people responsible for this.”

The explanation is the first offered by Mexican officials who have been almost silent since the explosion five days ago at the downtown campus of the nation’s largest company by revenue and the world’s fourth-biggest crude producer.

Mexico’s deadliest explosion since a mine accident in 2006 came as President Enrique Pena Nieto, who took office Dec. 1, planned to submit a bill to increase private investment in the energy industry and lower taxes on Pemex, as the company is known. The initiative would be the biggest energy-industry overhaul since the nation seized oil fields from British and U.S. companies 75 years ago.

No Odor

The gas in last week’s incident may have come from the ground or a nearby machinery room, or it could have been a leak of natural gas that’s processed in a building across the street from state-owned Pemex’s headquarters, Murillo said. Liquefied petroleum gas has been ruled out because of the lack of odor before the explosion, and whatever gas was involved may have been accidentally detonated by contractors who were working in the basement, Murillo said.

Forensic, chemical and explosive experts from the attorney general’s office, the Defense Ministry, the Navy, the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives and Spain’s National Police took part in the initial stage of the inquiry.

Pemex employees are set to return to work at the headquarters tomorrow, Chief Executive Officer Emilio Lozoya said at the press conference last night. The buildings were declared safe after a comprehensive security inspection, he said.

The explosion won’t have any financial or economic impact on Pemex, Lozoya told reporters Feb. 1. The executive took the helm of the oil producer two months ago.

President Criticized

The blast left shattered windows and gaping holes in walls on several floors in the building adjacent to the company’s main office, the second-tallest tower in the country.

The president drew criticism on Feb. 2 after local media reported he had left Mexico City for a vacation over the nation’s three-day weekend. He returned to the Mexican capital and toured the Pemex headquarters late the same day.

Some local media filled the silence with reports that the blast had been a deliberate attack. Mexico City newspaper La Jornada cited an unnamed metropolitan policeman as saying a suspicious suitcase possibly used to deliver an explosive device had been removed by investigators.

‘Unfortunate Accident’

Pemex Chief Financial Officer, Mario Beauregard, said the blast was an “unfortunate accident” that won’t affect the investment plans for the company this year.

The energy overhaul is on track to be sent to Congress in the coming months, Beauregard said today in a conference call with analysts. The blast and the energy bill “are totally independent events. The blast is a totally isolated event,” he said.

The cost to protect Pemex debt against non-payment for five years with credit-default swaps fell one basis point to 117 basis points at 11:47 a.m. in New York, according to data compiled by Bloomberg. Credit-default swaps pay the buyer face value if the issuer fails to comply with debt agreements.

The extra yield, or spread, investors demand to buy Pemex’s dollar bonds due 2023 instead of U.S. Treasuries narrowed more than 3 basis points to 171 basis points, returning to levels before the blast.

The government’s violent war against organized crime may have sparked speculation that the explosion was an attack. Mexico has been wracked by drug violence since then-President Felipe Calderon sent troops to fight the nation’s drug gangs 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.

An explosion carried out by a criminal gang attempting to steal oil from a pipeline in the state of Puebla killed 28 in 2010.

To contact the reporters on this story: Eric Martin in Mexico City at emartin21@bloomberg.net; Carlos Manuel Rodriguez in Mexico City at carlosmr@bloomberg.net

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


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