One Death Reported as Blast Rips Through Mexico Oil Refinery

September 8, 2010

An explosion ripped through a major Mexican refinery Tuesday, killing one worker and pushing gasoline and diesel prices higher on worries state oil monopoly Pemex will have to import more fuel.

Pemex, the world’s No. 7 crude producer and a large fuel importer, said a 32-year-old engineer was killed and two workers were severely burned when a compressor leak at the Cadereyta refinery’s gas oil hydrotreater unit triggered an explosion and a fire.

Another eight workers suffered minor injuries. The fire was quickly put out but Pemex did not say how operations at Cadereyta, Mexico’s third largest and most sophisticated refinery with a capacity of 275,000 barrels per day, were affected.

“We felt the windows shake. It was only a few seconds, but the whole building shook,” said Jose Luis Garza, a government employee in Juarez, about 10 miles from the refinery in northern Mexico.

U.S. oil product futures jumped after the explosion, before paring gains in afternoon trading.

The explosion comes in a year marred by serious accidents in the North American oil industry, including the Deepwater Horizon spill, a major pipeline accident in Michigan and an explosion at a Gulf of Mexico natural gas platform.

Francisco Montano, a Pemex spokesman in Mexico City, said the blast occurred in one of the refinery’s hydrotreating units, which removes sulfur from fuels under high pressure in the presence of explosive hydrogen gas. The unit was operating at the time of the accident.

There are five hydrotreaters at the refinery, which is one of the main sources of ultra-low sulfur diesel in Mexico.

The blast could force Mexico, which already relies on imports for more than 40 percent of domestic gasoline demand, to significantly boost fuel imports.

Pemex, which imports fuel due to a lack of refining capacity, bought 432,000 bpd of fuel from the United States in June, making it the top importer of U.S. refined products, according to the U.S. government.

“Mexico is already short of refining capacity and this will make it even shorter,” said Antoine Halff, deputy head of research at Newedge Group in New York. “It could well raise oil product prices as Mexico needs to increase imports.”

A Gulf Coast products trader said it was “hard to gauge” whether Pemex would pull more U.S. exports in the aftermath of the explosion. “Pemex already moves a lot of cargoes off the Gulf Coast,” the trader said.

Pemex, struggling under a mountain of debt and rapidly aging oil fields, is studying a plan to import crude oil for the first time in over three decades to improve the profitability of its refineries.

Oil exports account for about a third of government revenues in Mexico, which is struggling with its deepest recession since 1932.

(Additional reporting by Robert Campbell, Cyntia Barrera
Diaz, Miguel Angel Gutierrez and Catherine Bremer in Mexico
City and David Sheppard and Joshua Schneyer in New York,
Kristen Hays in Houston; Editing by Kieran Murray and
Marguerita Choy)

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