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MEXICO: Pemex Accidents Reveal Troubled Oil Monopoly

by James C. McKinley and Elisabeth MalkinNew York Times
May 15th, 2005



MEXICO CITY, May 14 - Juan González Durán, who like nearly everyone in Nanchital works for Pemex, the state-owned oil monopoly, had no doubt about who was responsible for his brother's death last month when a work crew cut into the wrong pipeline and six men died in a blast of ammonia gas.

Mr. González blamed a Pemex engineer who had been overseeing the job but left just before the accident.

"I was a worker for Pemex for years, and I worked on deep-sea platforms, and there I could tell you many bad things that the engineers would do, that they would not pay attention to the work," he said. "It makes me sick."

Mr. González is not the only one fed up in this region, the heart of the oil and petrochemical industry. The blast that killed his brother and five other workers was the latest in more than 12 pipeline accidents to befall Pemex since October.

The spills have focused Mexico's attention on what even company officials acknowledge is an old and poorly maintained network of pipelines. About a third of the network is more than 30 years old, and some pumping equipment is so antiquated that the company cannot find spare parts, Pemex officials say.

But the recent spate of accidents also highlights the complicated symbiotic relationship between the company and the government that is supposed to regulate it. Pemex provides the government with 40 percent of its income, and the environmental agency charged with policing the oil company is woefully underfinanced.

This year, Pemex's authorized budget for maintenance is almost $1 billion less than it needs, Luis Ramírez Corzo, who became Pemex's director general last December, has said. Lawmakers control Pemex's budget, and it pays some two-thirds of its revenue in taxes. Despite record high oil prices that increased revenues to $69 billion last year, Pemex, short for Petróleos Mexicanos, reported a loss of $1.3 billion.

Pemex officials complain that the government mainly uses the oil industry to finance the rest of its spending and puts too little money into infrastructure and maintenance.

Environmentalists say the company's sins, including padded payrolls and oil spills, go unpunished because its enormous importance to the nation's coffers gives it unparalleled political power. In particular, the federal environmental enforcement agency, known as Profepa, has proved toothless when policing Pemex facilities, they say.

"It's a fact that Profepa is very limited, it definitely follows the party line, they can't touch Pemex much," said Francisco Villagrán Ballesteros, a lawyer who has sued Pemex officials over the recent spills.

The Profepa chief, José Luis Luege, has been reduced to making threats he cannot carry out. On Thursday, he held a news conference to demand that Pemex repair 35 problem pipelines, but he acknowledged that it would cost $770 million. Pemex says it has money to repair just seven. Mr. Luege acknowledged that any decision to shut down a major pipeline - and halt a refinery - would probably have to be made by the president.

To many Mexicans who can recall catastrophic Pemex accidents in the recent past, the company is synonymous with a callous disregard for safety and the environment. In 1986, a liquefied petroleum gas terminal blew up outside Mexico City, killing more than 500. Six years later, a pipeline explosion in Guadalajara killed more than 200 people.

Since then, the company has worked to upgrade safety and maintenance, its officials say. It has opened its installations to government inspectors and Pemex executives now submit to public questions and rebukes in Congress. But the spills in Veracruz suggest that the company has a long way to go to repair decades of neglect along its 38,000 miles of pipelines.

Mr. Ramírez Corzo said Pemex needed to spend $12.3 billion on maintenance through 2008, a third of that on upgrading pipelines. "This is the crude reality," Mr. Ramírez Corzo said in April at a Senate hearing on the Veracruz accidents. "This is the company we have got, not the company we would like to have."

Last Dec. 22, the lack of maintenance that Mr. Ramírez Corzo has complained about led to a huge spill, one of the worst in years. At least 5,000 barrels of crude erupted from a ruptured pipe in Nanchital, flooded nearby fields, coated the Coatzacoalcos River and ended up on the beaches.

The spill could have been foretold, officials acknowledge. That section of the pipeline was identified as weak in 1997, but the first contractor hired to repair it was incompetent and abandoned the job, Pemex officials said. The pipeline was later patched but never replaced.

Then a turbine pump that should have been replaced a dozen years ago broke down, causing a leak and then a fire, Mr. Ramírez Corzo told lawmakers. Changes in pressure in the pipeline caused it to rupture where it emerges from the ground near the river.

"Our infrastructure has started to become old and tired," said José Manuel Olivares Páez, a Pemex official in charge of the oil pipelines. "There are always risks but the key is to evaluate periodically that your pipelines are secure. There are many points where they are not secure."

But Pemex says it cannot fix all those weak spots. While the government keeps tight control over Pemex's budget, its ability to watch over Pemex's compliance with environmental and safety regulations is hindered by a tiny budget and weak laws.

Profepa, an acronym for the federal prosecutor's office for environmental protection, employs just 150 industrial inspectors nationally, and Pemex has 2000 installations to check, said José Ramón Ardavín Ituarte, the deputy prosecutor for industrial inspection.

The pipeline from Nuevo Teapa to Poza Rica that burst last December had long been earmarked as a risk, but Pemex had promised to make improvements.

"We knew there was a risk there, but we could not do anything," said Gerardo A. Alvarado Salinas, Profepa's director general for inspection of pollution sources. "The law does not allow us to take preventive action. I cannot close this pipeline because tomorrow there might be a spill. I have to wait until there is a spill."

After an accident, environmental officials' tools are limited, because the law sets low fines. (Since 2001, Pemex has paid less than $5 million in penalties.) And prosecuting officials in connection with negligence is the responsibility of the attorney general's office, which has shown little appetite for taking on the company. In five years, the government has carried out one prosecution.

The accident in Nanchital in April released a plume of ammonia gas, estimated at 60 liquid tons, killed six workers in the excavation, blackened trees and plants for hundreds of yards and forced the evacuation of at least 900 people. It took two days to retrieve the bodies.

Just up the road from the site, family members waited grimly. The dead men left behind wives and children with little or no money. Most had been working for the subcontractor, Reparaciones Navales de Petroquímica, for only a few months. On May 4, Pemex gave $74,500 in all to the families of the six men, although it said it might be ordered to pay more in the future.

Pemex officials have tried to divert blame, saying the subcontractor cut into the wrong pipe after a supervising engineer left to check on the location of the right one. But family members asked why the workers had no protective suits.

"They put him in there to work without any protection," said Victor Armas Mayo, 56, whose 30-year-old son, Daniel Armas, was killed. "I don't know how Pemex allowed this."

A half mile away, Angel Martínez, who also works for Pemex, was fishing in the Coatzacoalcos River just a hundred yards from the site of the spill last December. Over the last four months, Pemex hired crews of former fishermen and brought in heavy machinery to remove more than 10,000 tons of contaminated soil and pile it at four sites along the river. But Mr. Luege said on Thursday that Pemex had not finished and ordered the company to remove the soil before the rainy season begins next month. The fish are back, as are the pelicans and gulls.

But worries that it will happen again remain. "They are very deteriorated, the pipelines here, and the company hasn't done anything," Mr. Martínez, 34, said, looking back at the pump station. "People are worried. This is not the first time."


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