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Mexico Announces Oil Refinery Project

Wednesday, June 5, 2019

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To make Mexico more self-sufficient in terms of energy production, President Andres Manuel Lopez Obrador—known as AMLO—has announced the kickoff of a 150 billion-peso ($7.7 billion) oil refinery.

The Dos Bocas refinery is slated to be the first constructed in decades and is slated to process up to 340,000 barrels of crude oil per day.

About the Refineries

Only a few months back, in March, Mexican Energy Minister Rocio Nahle announced that Mexico would be releasing bid documents on a new potential refinery. According to Nahle, the country suffered from a “severe dependence” on foreign fuels, importing about 80% of its gas and diesel products.

In addition to building a seventh refinery, the administration’s goal is to also increase production at the other six aging refineries owned by state-run oil company Pemex. The maintenance contracts plan to increase processing from its current 35% to a 70% capability.

Currently, three of the company’s plants have been offline the past several years due to operational issues or maintenance problems. However, in the early 2000s, maintenance attempts were announced and have yet to be completed.

By early May, ALMO had rejected three private sector bids for the project, vowing that Pemex would be the contractor for the plant’s construction, though many expressed worries about the company’s declining production. Additionally, the company is $108 billlion in debt, is a high tax burden and also has not built a refinery in the last four decades.

“Pemex is clearly not the ideal candidate to deliver this mage project,” said Pablo Medina, at Welligence, an energy consultancy. “It already has financial woes. This increases the challenges it faces … The execution risk is huge.”

After further discussion, because the new refinery already has $2.5 billion in initial resources for the year, it was decided that the project could become too problematic for Pemex.

By the end of the month, AMLO canceled the tender, due to failing attempts to meet a three-year timeline and $8 billion budget and chose to hand the project over to Petroleos Mexicanos.

What’s Happening Now

The government plans to open a bidding process for the six phases of the construction of the Dos Bocas refinery by the end of June.

However, before construction can break ground, Mexican authorities are required to present an environmental impact assessment as well as a pre-approved land use change. Authorities plan to start with a partial pre-approved technical study, slated to be approved later this week.

The project is expected to be complete by May 2022.


Tagged categories: Construction; Government; Government contracts; Latin America; Oil and Gas; Program/Project Management; SA; South America; Upcoming projects

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