Mexico’s Dos Bocas refinery facing US$0.9bn budget overrun

Bnamericas Published: Thursday, October 15, 2020
Mexico’s Dos Bocas refinery facing US$0.9bn budget overrun

Mexican state-owned oil and gas giant Pemex has confirmed that the government’s flagship US$8bn Dos Bocas refinery in Tabasco state has overrun its original estimated budget by US$918mn.

“The cost of the refinery is close to US$8.918bn,” said company CEO Octavio Romero Oropeza during an 8-hour session in congress where he also pushed back against recent criticism of the Mexican NOC, in line with a presentation sent to press and investors last week.

The refinery, which would process 340,000b/d once completed, is in the early stages of construction and works have advanced 13% so far. The government has budgeted 45bn pesos (US$2.1bn) in extraordinary financial aid for Pemex to fund the construction of Dos Bocas in 2021.

The announcement comes on the heels of an explicit refusal by President Andrés Manuel López Obrador (AMLO) to heed a call issued by the International Monetary Fund (IMF) to put the flagship refinery project on hold to make funds available to boost pandemic-related fiscal support.

The AMLO administration, including energy minister Rocío Nahle and the president himself, have often firmly assured the public that Dos Bocas would not exceed its US$8bn budget and pushed back against independent estimates that put the cost of the project US$10bn or more.

An initial technical evaluation conducted by the Mexican petroleum institute (IMP) said in 2019 that the project would cost US$14.7bn. A first tender for the refinery’s construction last year was declared void after all offers exceeded the cost estimates set by the government.

Romero Oropeza also fired back against the company’s critics, saying the media has overblown Pemex's financial troubles, which include accumulating debt over US$100bn while being unable to significantly increase its output. Romero Oropeza said most of the company’s woes were related to the COVID-19 pandemic and would ease with time.

“There has been an exaggerated campaign of stories, publications regarding Pemex, all of them negative and completely distorted, wrong and, at times, ill-intentioned,” the CEO said.


Romero was bullish on Pemex’s production targets for the coming years and he said the company plans to reach output of 1.9Mb/d (million barrels per day) by December 31, which would be a 17% increase over August production.

The company expects to lift output to 1.94Mb/d in 2021, 2Mb/d in 2022 and 2023 and 2.23Mb/d in 2024. According to the executive, this rapid hike in output despite significant production declines in some of Pemex’s most productive and older fields is possible thanks to a significantly reduced development time for the company’s new wells, thanks to regulatory and contractual simplification, among other factors.

In particular, Pemex is focused on 20 new priority fields, from which the company reported output of 127,700b/d in September, as BNamericas informed previously.

“Against the grain of what is happening with the majority of oil companies [due to the COVID-19 pandemic], Pemex is not giving up new investments and new production, because we care about production,” Romero Oropeza said.

He also pointed to the fact the company had turned around its production decline at the beginning of 2020 until an agreement with OPEC countries to curb production led it to slash 100,000b/d from output between May and July. Production edged up by 2% in August compared to July, the first increase since the agreement.

Lower prices after the oil price crash also led the company to curb its production, Romero said, as well as issues with freighter transport to export crude due to climate conditions, which forced the company to slash another 46,000b/d from production for a short period.

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