UPDATE 2-Mexico's Pemex and Guatemala to build $1.2 bln gas pipeline

Sat Jan 18, 2014 6:52pm EST

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By Mike McDonald

GUATEMALA CITY Jan 18 (Reuters) - Mexican state oil company Pemex and Guatemala will build a $1.2 billion, 600-kilometer (370-mile) gas pipeline linking the two countries and giving local manufacturers access to cheaper energy, a Guatemalan presidential spokesman said on Saturday.

Presidents from both countries will sign a bilateral accord at the World Economic Forum in Davos next week agreeing to the construction of the pipeline, between Salina Cruz, Mexico and the southern department of Escuintla, Guatemala, said Francisco Cuevas, a spokesman for the Guatemalan presidency.

Pemex will build 420 kilometers and Guatemala will build the remaining 180 kilometers, Cuevas said, adding that Guatemala plans to open the project to bidding this year and that the pipeline should be operational by 2016.

"The construction puts the focus on the transport of gas from Mexico to Guatemala," Cuevas said. "It's a fundamental step for the country."

Pemex declined to comment.

Home to roughly 15 million people, Guatemala does not produce natural gas. Cuevas said the pipeline will give Guatemalan manufacturers access to cheap Mexican gas, allowing them to become more competitive.

Guatemala's energy sector is small, but the government has been looking to expand it. Last year, on a visit to Guatemala, Mexican billionaire Carlos Slim expressed an interest in investing in oil and natural gas exploration in the Central American country.

Mexican President Enrique Pena Nieto last month signed a bill into law that ended the country's 75-year-old oil and gas monopoly. Under the new legislation, which is still being mapped out, foreign companies will be able to enter the sector, bringing expertise and efficiency to the ailing Pemex.

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