Southland Firms Win Mexican Gas Contract

In an award that gives two Southern California utilities a foothold in Mexico’s expanding energy market, a partnership including Pacific Enterprises of Los Angeles and Enova Corp. of San Diego has won rights to develop Mexico’s first privately financed and operated natural gas distribution system, to be located in Mexicali.

The award of the contract, announced in Mexico City on Monday by the Mexican Energy Regulatory Commission, is worth up to $25 million and calls for the partners to provide gas to an unspecified number of businesses and to as many as 25,000 residential customers in Mexicali over the next five years. The winners expect the Mexicali customer base to grow far beyond that level.

Pacific Enterprises, parent of Southern California Gas Co., and Enova, parent of San Diego Gas & Electric Co., are among the many foreign investors being lured to Mexico by the government’s bid to speed development of the country’s natural gas resources and to stimulate industrial development by making cheap, clean-burning gas more available.

The winning partnership, which also includes Proxima of Mexico, says it will begin service by July 1997. The award calls for a 12-year concession to sell natural gas to retail customers in Mexicali, a city of more than 800,000 people.

“We have a lot of interest in getting into other projects of this kind in Mexico so it’s good to get the first one under our belt,” Pacific Enterprises Chairman Willis B. Wood said in an interview.

In coming months, Mexico will invite foreign and domestic investors to bid on the construction and privatization of as many as 22 additional natural gas distribution networks for cities including Mexico City, Hermosillo and Chihuahua. Mexicali’s was the first one put up on auction.

The winning partners beat out two other bidders, Repsol of Spain, and a joint venture of Tenneco Energy of Houston and Westcoast Energy of Vancouver, Canada. The winner was selected on the basis of the lowest gas transmission costs and on market analysis and planning.

Mexican officials present at the bid award Monday said that the development of natural gas should stimulate heavy industry in Mexicali--which in turn will reduce the flow of workers across the border into the U.S.

“It’s important for the Baja California region because it’s been like a vicious circle; there is no heavy industry developed there because there is no natural gas,” said CRE Chairman Hector Olea.

Natural gas will be shipped to Baja California through an extension of an existing Pacific Enterprises trunk line that now stops one mile north of the U.S.-Mexico border in Imperial Valley.

In the face of oncoming deregulation and greater competition in Southern California energy markets, both Pacific Enterprises and Enova are trying to diversify with overseas investments. Pacific Enterprises recently bought a 12.5% interest in two gas distribution systems in Argentina.

Enova--in partnership with Pacific Enterprises, Bechtel Corp. and Pacific Gas & Electric--has proposed building a power plant costing up to $600 million in Rosarito, Baja California, about 20 miles south of Tijuana. The formal bidding process on the plant’s construction is to open in the fall.