Pemex's new refining projects to require US$12.2bn investment

Tuesday, April 14, 2009

Mexican state oil company Pemex will invest US$12.2bn to construct its new 300,000b/d refinery in Tula, Hidalgo state, and reconfigure its Salamanca refinery in Guanajuato state, CEO Jesús Reyes Heroles announced Tuesday.

The new refinery makes up US$9.1bn of the total, with the remaining US$3.08bn corresponding to the reconfiguration.

Both projects will have a combined net present value (NPV) of US$3.78bn and a 17.4% internal rate of return.

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The reconfiguration will be complete in 2014 with the new refining train coming online in 2015.

Pemex also evaluated the reverse - a new refining train at the Salamanca refinery and the reconfiguration of the Tula refinery.

That alternative would have required investment of US$12.9bn, or 5.52% more. It also represented a NPV of US$3.54bn, 6.15% less. Works for both the reconfiguration and new refining train would finish in 2015.

Pemex has not determined the exact way to finance refining works.

"It is a decision of financial policy of what is most suitable for us. That will be decided in the process. It is not something that needs to be decided right now, but rather when we're already going and when we have more precise cost estimates," Reyes Heroles said.

Pemex will use its own resources and issue debt to finance some of the refinery, Reyes Heroles said.

President Felipe Calderón announced last October the government would use 12bn pesos (US$917mn) from the stabilization fund for the refinery.

Hidalgo's state government will also contribute some 1.8bn pesos to finance the project, including US$60-70mn related to the acquisition of the minimum 700ha land necessary for the refinery, Reyes Heroles said.