Nahle denies reports of delays and cost overruns at Dos Bocas refinery

Mexican Energy Minister Rocio Nahle has responded indignantly to reports that the national oil company (NOC) Pemex is running over budget and behind schedule on the construction of the Dos Bocas refinery in Tabasco State.

On January 22, Nahle said in a post on her official Twitter account that the refinery project was not experiencing any setbacks. “Dos Bocas is being built in record time. Opinions around the world are very positive,” she wrote.

She also asserted that those who had described the project as behind schedule and over budget were not properly informed about the state of work on the oil-processing plant. “Today once again, there are speculative, alarmist and tendentious reports in some national media,” she said, adding that the allegations were coming from “characters who do not even know about the project.”

The minister took to Twitter after Bloomberg published an article saying that sources familiar with the situation were doubtful that the plant would be able to begin operating on schedule this year. The news agency’s sources said that the cost of building the plant appeared to have climbed to around $12.5bn, or about 40% above the previously cited figure of around $8.9bn. (Even the latter figure is higher than the original estimate of $8bn, but Pemex later revised the figure upward by $900mn.)

Nahle and other high-ranking Mexican government officials have remained adamant that the Dos Bocas refinery will start commercial operations in the middle of this year, as previously planned – and that the project will not exceed its $8.9bn budget. However, Bloomberg’s sources indicated that delays were probably unavoidable, meaning that the Dos Bocas plant might not be able to launch commercial gasoline production until 2023 or 2024.

Felipe Perez, a Latin America market analyst for IHS Markit, took an even bleaker view, saying that the new refinery might not come on stream before President Andres Manuel Lopez Obrador, the biggest champion of the project, finished his term in 2024. “Unfortunately, there’s a big discrepancy between the government’s expectations and reality,” he commented.

Bloomberg’s sources are not the only sceptics, as Pemex itself has expressed some reservations. In its most recent annual report, published in early 2021, the NOC said that the price tag for the 340,000 barrel per day (bpd) plant might be as high as $12.4bn. It also indicated that the refinery would not be able to start commercial operations in mid-2022. Instead, it said, in the best-case scenario, the facility may be able to launch trial runs and test production by that date but will not be able to do more.

Under these circumstances, Pemex commented, the business case for the Dos Bocas refinery may have to be revamped. “[It] will be necessary to reformulate the project, in particular the internal rate of return and the net present value,” the company’s 2021 annual report said.