KN Energy began an open season for its a 108-mile, 24-inchMonterrey Pipeline that would connect its MidCon Texas intrastatepipeline in Starr County, TX, to Monterrey, Mexico. The open seasonbegan last week and runs through 5 p.m. CDT July 30. KN expects tostart construction of the $50 million pipeline in 1999, withcompletion projected for the second quarter of 2000. Capacity isexpected to be 275 MMcf/d, and the pipe will serve gas-fired powerplants in Monterrey, local distribution companies, large industrialconsumers as well as future market opportunities.

“Mexico’s expanding natural gas market, with consumption growingby as much as 9% annually, requires expanded infrastructure and gascommodity imports,” said Bill Garner, KN International executivevice president.

“The Mexican government’s efforts to open this market – such asthe recent lifting of a 4% import tariff on natural gas – arepositive factors toward increasing our activity in Mexico,” Garnersaid. “These efforts increase competitive opportunities forcompanies like KN, which has built a strong presence in Mexico, tomeet the growing needs of residents, industry and power-generatingcompanies.”

However, last week doubt was cast on the lifting of Mexico’stariff on gas imports when a group of U.S. oil producers filed apetition accusing Mexico along with Iraq, Saudi Arabia andVenezuela of illegally dumping crude oil on the U.S. market atprices below normal value. The Oklahoma-based group Save DomesticOil (SDO) filed the petition with the Commerce Department and theInternational Trade Commission. This is said to have angered theMexican government, causing officials to consider eliminating thetariff.

Mexico’s energy regulatory commission (CRE) has approved amaximum rate for the Monterrey Pipeline’s transportation serviceof about 16 cents/MMBtu, said Delia Gallardo-Barnett, KN businessdevelopment analyst. The company is not disclosing other rateinformation. Only recently have rates for transportation on Pemexpipelines been published as part of the pipes’ general terms ofservice, she said.

Mexico’s third-largest city, Monterrey is the industrial centerof the country and one of the largest gas markets in Latin America.The pipeline will serve a couple different distribution companiesas well as a number of industrial plants. However, the big draw forgas is power generation as several new power plants are planned inthe next four years.

KN’s other projects in Mexico include Gas Natural del Noroeste,the first local distribution company hooking up residents andcommercial customers in Hermosillo, a city of 500,000. KN also is apartner in Igasamex, a gas pipeline connection/marketing company inMexico City bringing service to industries in central and southernMexico.

For information on the open season, call Enrique Velasco, of KNInternational, in Mexico City at (525)261-8109.

In other Mexican news Mexico’s CRE issued a gas distributionpermit to DGN de La Laguna-Durango (Sempra Energy), the winner ofthe bidding process for the geographic zone of Torreon Coahuila, aswell as Gomez Palacio, Ciudad Lerdo and Victoria de Durango,Durango. Sempra would serve more than 50,000 customers within fiveyears. The system is to serve five large industrial customers and979 commercial establishments with the remainder being residentialcustomers. The project calls for $34.4 million to build a 640-milesystem to will carry 38.5 MMcf/d.

DGN de la Laguna-Durango is a subsidiary of San Diego-basedSempra Energy International.

Joe Fisher, Houston

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