Mexico inks deal on gas line from AZ border

Kinder Morgan to operate portion from Tucson; route is a concern
2013-04-10T00:00:00Z Mexico inks deal on gas line from AZ borderStaff And Wire Reports Staff And Wire Reports Arizona Daily Star

Mexico's president says a Japanese company has been tapped to build a pipeline to import U.S. natural gas south from the Arizona-Mexico border.

President Enrique Peña Nieto is visiting Japan, where he made the announcement about the $460 million project Tuesday. Japan's Mitsui Corp. will build the pipeline in Mexico.

It wasn't clear Tuesday how much of the route the new contract will cover, but Mexico eventually wants the pipeline to run to the ports of Guaymas, Sonora, and Mazatlán, Sinoloa.

On the U.S. side, the pipeline will be operated by Kinder Morgan and is expected to run from Tucson to the border at Sasabe - but it's controversial with Pima County officials.

The pipeline will allow Mexico to import 770 million cubic feet of gas per day from the United States, "drastically reducing the current cost," Reuters quoted Pemex, Mexico's government-owned oil monopoly, as saying.

Mexico's gas network already includes a number of active connections with the United States.

Neither Peña Nieto's office nor Pemex would provide any other details on the deal, The Associated Press reported.

Tucson Mayor Jonathan Roths- child praised the move as a positive step for the region.

He said the pipeline will allow Sinoloa to diversify its economic base and not rely entirely on agriculture.

"The stronger we can make the Mexican economy for the Mexican people, the better it's going to be for both countries," Rothschild said Tuesday. "I hope they follow through with it."

Pima County Administrator Chuck Huckelberry said he was not surprised by Mexico moving forward with building the gas pipeline.

"Natural gas is cleaner for the environment. There is a demand in Mexico for gas, and there is supply in the U.S.," Huckelberry said.

"It is their decision where they want to build the pipeline in Mexico," he said.

"Our concern is the pipeline route through the United States. We need an alignment that does the least harm," said Huckelberry, adding that Kinder Morgan's proposed route through Arizona "is a big concern."

The $204 million Sierrita Pipeline Project is scheduled for construction next year. Kinder Morgan has applied to build a 59-mile, 36-inch pipeline through the Altar Valley and next to the Buenos Aires National Wildlife Refuge.

The pipes would deliver natural gas to power plants in Mexico from existing pipes in Tucson.

The route through Southern Arizona, which the Pima County Board of Supervisors opposes, is under review by the U.S. Federal Energy Regulatory Commission, Huckelberry said.

Huckelberry said the route will in effect create an additional corridor from Mexico into the United States for people smugglers and drug smugglers. He also said it would impact the environment.

"It will be harder for Border Patrol to patrol, so there will be less control over the area," Huckelberry said.

The county would rather see the pipeline built along an existing corridor - Arizona 286, which is also known as the Sasabe Highway - which already is patrolled by Border Patrol agents, Huckelberry said.

It is unclear if the deal struck Tuesday is contingent on the project being approved on the U.S. side of the border.

The contract was signed while Peña Nieto visits Asia to promote interest in the Mexican economy.

The Japanese company Mitsui apparently will be an investment partner to Sempra International. Sempra's Mexican business unit was previously awarded two contacts by the Mexican federal electricity commission to build, own and operate the natural gas pipeline in northern Mexico.

Reuters reported Tuesday that under the terms of the agreement, Pemex and Mitsui - described as one of Japan's largest conglomerates - will also explore the possibility of building another, larger pipeline in Mexico at a cost of nearly $800 million.

"Increasing the gas supply supports the manufacturing industry and helps the development of the petrochemical industry and the fertilizer industry, bringing more work to the countryside," Reuters quoted Pemex Chief Executive Emilio Lozoya as saying.

Mitsui has had operations in Mexico since 1910. From a Mexico City base, it has projects in the seaports of Guaymas, Topolobampo and Mazatlán.

The company is a growing player in the Mexican energy sector, with five power plants in northern Mexico and numerous energy-related projects throughout the country.

Mexico's energy policy is to expand the natural gas market and reduce reliance on fuel oil. Mexico is trying to change over to natural gas as its primary fuel for the future.

Peña Nieto has repeatedly said he wants to privatize sectors of the oil giant Pemex, ending what he's described as its corrupt monopoly.

Star reporters Gabriela Rico, Carmen Duarte and Darren DaRonco contributed to the report, as did The Associated Press.

Copyright 2014 Arizona Daily Star. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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