While the Mexican national oil company, Petroleos Mexicanos (PEMEX) worked to bring its major natural gas supply pipelines back into operation last week following major explosions carried out by terrorists on its natural gas and oil pipelines, analysts in the United State said that despite the limited connections to the affected region in Mexico, the blasts early last Monday initially had a psychological impact on the U.S. natural gas market.

Some analysts were discounting the impact of the explosions on the U.S. natural gas market because Mexico accounts for only 0.3% of U.S. imports. The United States also exports gas to Mexico, however, and some of the lines connecting the two countries are reversible. Since Pemex conceivably could have called on increased supplies from the United States, the disaster reportedly was a factor in a big jump of 39 cents in October natural gas futures last Monday.

Three pipelines in Texas, Tennessee, Texas Eastern and Kinder Morgan Texas, and El Paso in Arizona and Sempra Energy in California have border connections. Of the Texas lines, only Tennessee was actively flowing gas to Mexico, according to Mark Chung of Bentek Energy. The U.S. connections, however, are necessarily along Mexico’s northern border and there is not much internal infrastructure in Mexico to connect with the industrial area in the south around Mexico City where the blasts occurred. That area is mainly served from Pemex installations in the Gulf of Mexico.

“It would shock me” if there was more than 1 Bcf/d of U.S. export capacity to Mexico among all of the border-crossing lines, said Citigroup analyst Tim Evans. Another aspect is that Mexico has no liquefied natural gas terminals that could be used to help make up the supply shortfalls, he said. He saw the Mexican supply disruptions as more of a psychological support to the U.S. gas market than a physical issue.

The blasts occurred in the state of Veracruz on Mexico’s East Coast. The explosions could be felt as far as 20 kilometers (12 miles) away, officals said. No injuries were reported but several communities were evacuated. One of the pipelines disrupted reportedly was a main line into Mexico City.

The blasts were believed to be the result of terrorism carried out by the People’s Revolutionary Army, the same group that claimed responsibility for the gas pipeline attack in Mexico in July.

While Pemex said it would be able to maintain crude and products deliveries “through extraordinary measures,” steel, auto and other industrial plants were forced to close down as between 1.2 and 1.4 Bcf/d of natural gas was interrupted. Pemex had to wait for some hours after the blasts to the fires to burn out before starting repairs. Crews then immediately began working on bypasses around the blast sites.Pemex spokesman Carlos Ramirez told NGI they expected to have gas flowing at all points by Sunday or early Monday (Sept. 17).

Some traders said the explosions definitely have real implications on U.S. energy supply and demand. “The Mexican story is real to the U.S. energy markets and I think it spooked natural gas futures higher on Monday,” said a Washington, DC-based broker. “It is a new unknown factor on the markets, which has the potential of being a long-term unknown. While natural gas is not yet completely a global commodity due to transportation issues, it is certainly a global market when it comes to the U.S. and Mexico. If this is going to suck down some more of our gas inventory to go down there, and this becomes more of a long-term campaign by the rebels, then our markets could certainly be affected. If this is some rebel group starting a campaign, we definitely have to keep an eye on this.”

According to Pemex, the explosions occurred at the following locations:

Jesus Reyes Heroles, the head of Pemex, said it would take four or five days to restore lost service after the situation is brought under control, and Pemex would have to burn off whatever gas it did not succeed in recovering.

©Copyright 2007Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.