HIGH PRICES, LOW DEMAND EXPECTED TO HINDER US GAS EXPORTS TO MEXICO

HIGH PRICES, LOW DEMAND EXPECTED TO HINDER US GAS EXPORTS TO MEXICO

Valero Energy Corp.'s natural gas subsidiary doesn't expect a rebound in U.S. gas exports to Mexico unless U.S. gas prices drop or conditions in Mexico change to favor more gas usage, said Terry Ciliske, the unit's senior vice president.

In a paper presented at a conference here last week, Mr. Ciliske said one trigger for increased U.S. gas exports would be a drop in U.S. gas prices to levels that make it economical to operate marginal petrochemical plants in Mexico.He said another would be a rise in Mexican gas demand stemming from additional electricity generating capacity or the reduced use of residual fuel oil produced by Mexican refineries.

Data accompanying Mr. Ciliske's paper showed U.S. gas exports to Mexico have plunged since peaking in the fourth quarter of 1992, at 28.5 billion cubic feet.

The data showed exports in the first three quarters of this year totaled 14.0 billion cubic feet, 10.4 billion cubic feet and 8.7 billion, respectively.

Valero's gas pipeline system, which is linked to the system operated by the Mexican state energy company Petroleos Mexicanos, transported roughly half of the U.S. gas exported to Mexico in the past year, the data showed

Mr. Ciliske said that Valero is working with Pemex to develop ''environmentally benign" uses for Mexico's residual fuel oil, which is widely used for power generation domestically.

The residual fuel oil has virtually no export markets because it produces too much air pollution to meet foreign environmental standards.

The drop in Mexico's gas imports has been attributed mainly to the country's economic slowdown.