Baja Hoping for Federal Subsidy for Natural Gas

Baja California hopes to get federal relief this week from its own natural gas crisis, a spillover from the tumultuous U.S. energy markets that has sent prices soaring and triggered plant closings and layoffs here.

The Baja region has been paying prices as much as four times higher than the rest of Mexico, which is getting natural gas at $4 per million British thermal units under a price cap that excluded Baja when it was imposed by the government in January.

The subsidy appeased communities and industries across Mexico that had been hit with the same high prices as the United States.

But it infuriated Baja business leaders and foreign investors whose export factories suddenly were uncompetitive with the rest of the country.

Gov. Alejandro Gonzalez Alcocer said in an interview Friday he expects the administration of President Vicente Fox to act within days to extend the subsidy to Baja California. Gonzalez Alcocer pleaded his case when Fox visited Tijuana last week.

“We told the president we are not competitive with these high gas prices and that we have already seen companies put on the brakes to investment,” Gonzalez Alcocer commented Friday after he dedicated a new police station here, in Mexico’s second-fastest-growing city after Cancun.

Jesus Manuel Sandez, president of the Tijuana office of the Chamber of National Industry, said at least three major manufacturers in Mexicali have had to lay off employees and cut back production because of high natural gas prices: steel manufacturer Siderurgica California; glass maker Sevisa and baking giant Bimbo.

The natural gas shortage that has gripped much of the U.S. and helped drive up wholesale electricity costs in California and other states spilled over into Baja because the region gets all its gas from U.S. suppliers via pipelines.

By contrast, the rest of Mexico is connected to a pipeline grid fed mainly by Mexican wells and controlled by state-owned energy monopoly Petroleos Mexicanos. That grid does not reach Baja California.

Baja’s natural gas problems are perceived as short-term, a fact underscored by reports last week that U.S. power generator AES Corp. is in discussions to build a power plant here.

AES, which specializes in building natural-gas-fed power plants and selling wholesale electricity, would spend $350 million on the facility, to open in 2004.

The AES proposal represents one of half a dozen power plants either under construction, planned or being considered for Baja California, which is increasingly seen as an ideal platform from which to generate electricity for export to energy-starved neighbors to the north.

The new plants would be fed by a 212-mile natural gas pipeline from Arizona linking Baja to gas delivered over the North American grid from producers in Texas, the Midwest and Canada.

The pipeline, to be co-developed by Sempra Energy of San Diego, is scheduled to come on line in late 2002.