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Monterrey Line Starts Open Season

Monterrey Line Starts Open Season

KN Energy began an open season for its a 108-mile, 24-inch Monterrey Pipeline that would connect its MidCon Texas intrastate pipeline in Starr County, TX, to Monterrey, Mexico. The open season began last week and runs through 5 p.m. CDT July 30. KN expects to start construction of the $50 million pipeline in 1999, with completion projected for the second quarter of 2000. Capacity is expected to be 275 MMcf/d, and the pipe will serve gas-fired power plants in Monterrey, local distribution companies, large industrial consumers as well as future market opportunities.

"Mexico's expanding natural gas market, with consumption growing by as much as 9% annually, requires expanded infrastructure and gas commodity imports," said Bill Garner, KN International executive vice president.

"The Mexican government's efforts to open this market - such as the recent lifting of a 4% import tariff on natural gas - are positive factors toward increasing our activity in Mexico," Garner said. "These efforts increase competitive opportunities for companies like KN, which has built a strong presence in Mexico, to meet the growing needs of residents, industry and power-generating companies."

However, last week doubt was cast on the lifting of Mexico's tariff on gas imports when a group of U.S. oil producers filed a petition accusing Mexico along with Iraq, Saudi Arabia and Venezuela of illegally dumping crude oil on the U.S. market at prices below normal value. The Oklahoma-based group Save Domestic Oil (SDO) filed the petition with the Commerce Department and the International Trade Commission. This is said to have angered the Mexican government, causing officials to consider eliminating the tariff.

Mexico's energy regulatory commission (CRE) has approved a maximum rate for the Monterrey Pipeline's transportation service of about 16 cents/MMBtu, said Delia Gallardo-Barnett, KN business development analyst. The company is not disclosing other rate information. Only recently have rates for transportation on Pemex pipelines been published as part of the pipes' general terms of service, she said.

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

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

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

In other Mexican news Mexico's CRE issued a gas distribution permit to DGN de La Laguna-Durango (Sempra Energy), the winner of the bidding process for the geographic zone of Torreon Coahuila, as well as Gomez Palacio, Ciudad Lerdo and Victoria de Durango, Durango. Sempra would serve more than 50,000 customers within five years. The system is to serve five large industrial customers and 979 commercial establishments with the remainder being residential customers. The project calls for $34.4 million to build a 640-mile system to will carry 38.5 MMcf/d.

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

Joe Fisher, Houston

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