Mexico explosion: How will the Pemex blast affect the country's race for oil?

In Mexico City, a powerful explosion rocked the headquarters of state oil giant Pemex, killing at least 25 and injuring 100 others.   

Guillermo Gutierrez/AP
Firefighters and workers dig for survivors after an explosion at an adjacent building to the executive tower of Mexico's state-owned oil company, Pemex, in Mexico City on Thursday.

The deadly explosion that shook a national symbol of Mexico – its giant state-owned oil company – threatens to shake public confidence in an oil industry at a crossroads. 

The cause of the blast, which killed at least 25 workers and injured some 100 others Thursday afternoon, is still undetermined. 

And while working in the oil industry is a risky business, with explosions at oil rigs and refineries annually, this happened at the Petroleos Mexicanos (Pemex) headquarters in the heart of Mexico City, a city of 8 million. 

The explosion comes at a time when the country, facing declining oil reserves and a technological catch-up game, is in the middle of a debate on how to allow more private investment and outside expertise into the state oil monopoly. 

Privatization is strictly forbidden under the Constitution, but new Mexican President Enrique Peña Nieto had made it a campaign promise to push through meaningful reforms to draw in more private players. The blast – especially if related to safety standard failings – could cast more doubt over the company's ability to modernize. 

More than 3,000 people were evacuated within 10 minutes of the explosion, according to Milenio Television, as plumes of smoke swirled. The explosion occurred in the basement of an administrative building next to the company's main high-rise before 4 p.m., generally the end of the lunch hour in Mexico. Many employees may not have been inside the building.

As of early Friday morning, more than two dozen people remained trapped in rubble. 

Hours after the explosion, rescue workers were desperately trying to reach those still trapped, with family members despairing over a lack of news from their loved ones. Local and federal authorities rushed to the scene, as did the Mexican military.

"I profoundly lament the death of our fellow workers at Pemex. My condolences to their families," President Peña Nieto said in a tweet.

There is no official explanation yet for what caused the explosion. Pemex had earlier hinted at a problem in the electrical system but then said publicly that the company was investigating the cause. “Any other explanation with respect to this is speculation,” the company said on Twitter Thursday. Rumors of bombs and sabotage were spread over social media.

And local media immediately asked questions about Pemex’s safety standards and whether a maintenance issue was behind the blast. 

In 1938 Mexico's president, Lazara Cardenas, kicked out American and European firms and set up Pemex, a classic state takeover that is considered one of the most popular moves in Mexican history.

George Baker, an expert on the Mexican oil industry who runs Energia.com in Houston, says he believes the tragedy will not shake public trust in the powerful Pemex. “The narrative about Pemex is not shaken by explosions,” says Mr. Baker. “Pemex controls the oil narrative in Mexico.”

Oil accidents are not uncommon. Just this September, 30 died from a fire at a Pemex pipeline in northern Mexico. Scores were killed in an explosion in August at Venezuela’s largest refinery. The Deepwater Horizon explosion off the coast of Louisiana killed 11 workers in April 2010.

According to internal statistics, Pemex’s safety record has improved in recent years. After the September pipeline fire, The Associated Press published statistics showing that the number of accidents per million hours worked dropped by more than half, from 1.06 in 2005 to 0.42 in 2010, in line with the international average.

But Baker says that, unlike the Deepwater Horizon case,  he expects little accountability in this case, and that is part of a longer-term problem that affects safety overall. “There is a kind of immunity from prosecution that can allow people to be less obsessive about safety because they are in some ways protected against things going wrong,” he says.

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