Price tag for Olmeca refinery reportedly jumps to US$16-18bn

The cost of the Mexican government’s flagship Olmeca (ex-Dos Bocas) oil refinery is reportedly spiraling to as high as US$18bn, or more than double the original estimated price tag of US$8bn.

Citing anonymous sources familiar with the matter, local media outlet El Financiero reported that the final cost to build the 340,000b/d refinery will likely come in at between US$16bn and US$18bn.

The estimate is well above reports in April that costs had exceeded US$10bn and an energy ministry (Sener) estimate that it could cost US$14bn. 

Sener requested additional funding from congress in April, and it remains unclear where that request currently stands.

The report from El Financiero comes just over a week before the plant's inaugural ceremony set for July 2, and the outlet said representatives for national oil company Pemex, Sener and President Andrés Manuel López Obrador (AMLO) had not responded to requests for comment.

Construction costs have been impacted by high inflation, which hit 7.65% in May – the highest level since January 2001; in addition to extra costs as Pemex is rushing to complete works by July 2, according to the report.

The number of contracts accounted for by Pemex increased from about 100 to around 270 in the last six months, one of the sources told El Financiero.

AMLO last week confirmed that the refinery in his home state of Tabasco will not enter full operation until completing a testing phase that will not finish before year-end, potentially continuing into 2023.

The leftist leader sees Olmeca as a critical element to achieving his goal of attaining fuel self-sufficiency before leaving office in October 2024.

From the beginning, international contractors considered the project’s budget to be excessive, many of them refusing to participate in the construction. As a result, AMLO tasked Pemex and Sener to assume the works within an ambitious three-year time frame.