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Mexico to Take Bids on Pipeline Projects

Energy: Government will allow U.S., other foreign firms to compete to build natural gas networks in 10 urban areas.


MEXICO CITY — Mexico on Wednesday sharply expanded its efforts to lure private capital to its natural gas industry, announcing it will open 10 pipeline projects around the country to bidders--including one that would bring California natural gas into Mexico.

U.S. companies have been eagerly eyeing the Mexican natural gas market since last fall, when a new law allowed foreigners to compete in energy development and transportation here for the first time in 60 years.

The Energy Ministry said private foreign and Mexican companies will be invited to bid on projects to build and operate natural gas distribution systems in 10 urban areas. They include Mexico City and energy-hungry northwestern Baja California, which includes Tijuana, Rosarito, Ensenada and Tecate.

Among those interested are Pacific Enterprises, parent of Southern California Gas Co.; and Enova Corp., parent of San Diego Gas & Electric Co., which expect a joint bid for a proposed Baja California project.

Licenses for the projects will be granted by the end of 1997, the government said. The projects call for connecting homes and businesses to existing natural gas pipelines.

The natural gas expansion is part of an ambitious plan by Mexico to increase its supply of energy. Over the next decade, the country expects demand to increase about 5% a year, twice the U.S. rate. In addition, the government wants to develop its relatively untapped natural gas reserves and be prepared for clean-air rules that take effect in 1998.

Currently, only a few industrial zones and neighborhoods in Mexico have access to natural gas, which is considered less polluting than other fuels.

Stephen Baum, chief executive of San Diego-based Enova, said in a telephone interview that the company is interested in bidding on several projects, including in Baja. That region is appealing because "there's a significant industrial load and there's no gas," he said. Companies instead burn fuel oil or use expensive electricity, he said.

The government estimates that demand for natural gas for homes and energy plants in Baja California could reach 135 million cubic feet a day. Mexico is considering a $400-million gas-powered power plant for Baja.

An additional 65 million cubic feet a day in demand could come from companies that switch from fuel oil, the government said.

Currently, most Mexican homes use cheap, government-subsidized liquid propane fuel.

John Peterson, a vice president at Pacific Enterprises who deals with the Latin American market, said a decrease in the subsidies would make natural gas more attractive.

"I believe we're going to see the Mexican government back off these subsidies," he said.

The government previously kicked off an international bidding contest for a new natural gas distribution project in the border city of Mexicali.

That license is to be awarded in August. The government has also said it will take bids for the Chihuahua area. In addition to Baja and Mexico City, the areas added Wednesday are Hermosilla, Cuernavaca, Pachuca, Queretaro, Tampico, Toluca and the northern regions of Bajio and La Laguna.

The Energy Ministry also invited private companies to suggest other areas where they'd be interested in building natural gas networks.

Although details of the projects weren't announced, they are expected to require investments of hundreds of millions of dollars.

Most of the areas announced Wednesday are near natural gas pipelines belonging to Petroleos Mexicanos, the state-owned petroleum company. Baja California is expected to import its natural gas from the United States.

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