Bloomberg News

Pemex Workers Return With Source of Gas Buildup Still Unknown

February 06, 2013

Petroleos Mexicanos employees return today to their Mexico City headquarters where 37 people died last week as authorities search for the source of a gas buildup that caused the nation’s deadliest explosion since 2006.

The gas buildup “isn’t there anymore,” the state owned oil company known as Pemex said on its Twitter page. “Conditions are safe to resume work.”

Activities at the headquarters will resume, with the exception of buildings B1 and B2, the company said in a post yesterday that was confirmed by its press department.

Mexican authorities said on Feb. 4 that a buildup of gas, possibly methane, led to the blast, the first official hypothesis to explain the Jan. 31 explosion. Deputy Attorney General Alfredo Castillo said yesterday that investigators are still looking for the cause of the gas accumulation and inspecting potential corrosion from pipelines in a Pemex cooling facility across the street from explosion site. The Attorney General’s office requested that Pemex postpone the reopening of its headquarters until today as evidence was recovered.

Investigators are still probing whether the blast was an accident or an intentional act, Attorney General Jesus Murillo told reporters at a press conference in the nation’s capital on Feb. 4.

“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,” he said.

Castillo said that his team of detectives is trying to figure out whether the gas came from a leak caused by bad maintenance or if the inert gas was naturally produced from underground residuals.

Engineers Review

Engineers from Mexico’s National Autonomous University, Empresas ICA SAB and Pemex reviewed the physical condition of the buildings that are reopening today, including the main tower, which is the country’s second-tallest, Pemex said in a statement yesterday.

The buildings were declared safe after a comprehensive security inspection, Chief Executive Officer Emilio Lozoya said at the Feb. 4 press conference.

National Action Party Senator Javier Lozano, a labor minister under former President Felipe Calderon, said reopening the complex is premature.

“What kind of guarantee is there that in that area there won’t be a similar problem in the coming days?” Lozano said yesterday, according to a recording posted on his website. “No worker should return until there’s absolute clarity where the gas came from.”

Energy Overhaul

Pemex’s second deadly explosion in five months 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.

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

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

Budgetary Autonomy

While the exact details of Pena Nieto’s energy proposal have yet to be announced, his modernization push should at least offer more budgetary autonomy to Pemex, said Homero Nino de Rivera, a PAN congressman and a former executive at the company.

Opponents to an energy overhaul “may become sensible to the idea of changing the limits on how Pemex spends its money,” he said.

The investigation has ruled out liquefied petroleum gas due to the lack of an 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.

The blast left shattered windows and gaping holes in walls on several floors in the building adjacent to the company’s main office.

Safety Measures

Nino de Rivera said Pemex needs more control over its revenue so it can take needed safety measures.

“How is it possible that a company as profitable as Pemex cannot reinvest on its own maintenance without asking the Finance Ministry for an approval?” Nino de Rivera said.

Methane has been the cause of Mexican industrial accidents in the past, with the gas being determined as the most likely cause in two deadly blasts in coal mines in northern Mexico last year, as well as a 2006 disaster at a Grupo Mexico SAB mine that killed 65 workers.

The cost to protect Pemex debt against non-payment for five years with credit-default swaps fell one basis point to 117 basis points yesterday 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 in 2023 instead of similar-maturity U.S. Treasuries narrowed four basis points to 172 basis points yesterday.

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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