Mexico’s unfinished Dos Bocas refinery. Photo: Dos Bocas

By THE PULSE NEWS MEXICO STAFF

The cost of Mexico’s Dos Bocas refinery — one of President Andrés Manuel López Obrador’s pet megaprojects — is expected to cost 40 percent more than previously estimated — some $3.6 billion more — and is unlikely to be completed before the government’s 2022 deadline, inside sources reported.

Construction of the 340,000-barrel-per-day refinery is now projected to cost about $12.5 billion, insiders at the state-run Petróleos Mexicanos (Pemex) who asked to remain anonymous told Reforma newspaper in an interview Thursday, Jan. 20.

The facility, located in AMLO’s home state of Tabasco, is crucial to the government’s plans to halt crude exports by 2023 and to become self-sufficient in fuel production.

New roadblocks to the project’s come as critics are already questioning Pemex’s ability to refine all of its own crude, given declining production, lack of refinery maintenance and its heavy debt load, which, at more than $113 billion is the highest of any oil company in the world.

The new figure for the completion of Dos Bocas is much higher than the estimated $8.9 billion Pemex’s chief executive gave 15 months ago, a reflection of construction delays, rising material costs and an unrealistic budget from the start.

Moreover, Dos Bocas will probably not produce a single gallon of gasoline in 2022 and could produce only limited amounts of fuel for several years afterward, according to analysts.

The Dos Bocas project is not the only plant where Pemex will end up spending more than it initially stated.

The company on Thursday, Jan. 20, paid more than $1.5 billion to take over a refinery in Deer Park, Texas, which it acquired from Royal Dutch Shell Plc, more than double the price announced in May for the deal and which, in May of last year, Moody’s Analytics, one of Big Three financial ratings agencies, downgraded to “junk” status.

That double whammy of rising costs will put pressure on Pemex’s balance sheet and Mexico’s coffers, since both the construction of Dos Bocas and the purchase of Deer Park rely heavily on federal funds.

Energy Secretary Rocío Nahle said in August that Dos Bocas was on track to begin conducting commissioning tests in July and be open to the public a few months later during 2022.

She also said the cost of the project was within budget at $8.9 billion.

The refinery was originally budgeted at $8 billion, an amount international contractors deemed inadequate for the scope of the project, prompting many to refuse to take part in a construction tender in 2019.

The pace of spending on the project to date underscores how unlikely it is to stay close to its previous budget.

As of December 2021, the Mexican government had given Pemex 120.9 billion pesos, or $5.9 billion, to spend in Dos Bocas, according to data provided by Joel Tonatiuh Vázquez Pérez, an expert in energy and public finances from the center of studies of the Center for Economic and Budgetary Research (CIEP) in Mexico City.

This year another 45 billion pesos, or $2.2 billion, have been earmarked for the refinery, bringing the total allocation to $8.1 billion.

In 2021 alone, the government spent 81.4 billion pesos, almost double the 45 billion pesos that it had initially allocated for that year, on the refinery.