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Pemex structure With a Pemex authorization earlier this month of US $6.47 billion, the budget for Mexico's newest refinery more than doubled to over US $20 billion.

AMLO defends refinery’s cost overrun from US $9 billion to $20 billion

'Not everything was considered,' López Obrador said of the original budget

The final cost of building the new Pemex oil refinery on the Tabasco coast will be just over US $20 billion, according to a government document, more than double the original estimate of $8.9 billion.

The newspaper El Universal reported Tuesday that it obtained a document that showed that the state oil company board authorized an additional $6.47 billion in spending on the project earlier this month.

The cost of building the Olmeca Refinery at the Dos Bocas port had already exceeded the original estimate and the project is now slated to cost just under $20.1 billion.

Asked at his regular news conference on Tuesday how much the cost of the refinery had increased, President López Obrador only conceded an overrun in the US $2 to $4 billion range.

AMLO
President Lopez Obrador downplayed the news, only conceding an overrun in the US $2 to $4 billion range for the Olmeca Refinery project at Dos Bocas. Presidencia

“Not everything was considered,” he told reporters at his regular news conference. “Anyway, it turned out cheaper than foreign companies estimated,” López Obrador said.

When announcing in 2019 that the government had scrapped the bidding process for the new refinery on the grounds that the bids were too high and the project would take too long, the president said that foreign companies’ estimates ranged between $10 billion and $12 billion.

On Tuesday, he said the cost of the refinery increased because all the equipment required to operate it wasn’t originally considered. “For example, the gas pipeline [to the refinery] wasn’t included,” he said.

López Obrador ruled out imposing sanctions on the officials who formulated the original cost estimate and advised journalists and “the entire [Mexican] population” to remain calm because “no one did business for personal gain in the construction of the refinery.”

Mexico Energy Minister Rocio Nahle and President Lopez Obrador
The president also defended Energy Minister Rocio Nahle, who has overseen the project. Government of Mexico

“There is no corruption; it’s no longer the same as before,” he said. “The person in charge of building the Dos Bocas refinery, [Energy Minister] Rocío Nahle, is an upright, honest woman,” López Obrador said.

“And the refinery is already finished,” he added, although it’s not expected to begin refining oil until late 2023 at the earliest.

“If we wanted to build it now, it would cost double, and we wouldn’t finish it in the time in which it was built,” he said. “It’s a great project. … We’re very happy with the project, … we’re going to process 340,000 barrels of crude oil per day. And a refinery hadn’t been built for over 40 years,” López Obrador said, describing its construction as an “unprecedented” feat.

“… Of course, the media that is at the service of vested interest groups, the oligarchy, of those who dedicated themselves to looting and stealing, is in disagreement with everything we do: the [Félipe Ángeles] airport, the refinery, the Maya Train. In disagreement with the pensions for seniors, the scholarships for young people, in disagreement with everything,” he said.

“It must be made very clear that the great difference between the neoliberal governments [of the past and us] – the crux of the matter, … is that corruption is not accepted in this government, corruption is not allowed. … We’re not thieves. The problem of the neoliberal governments is that they were thieves, … and not just the politicians but the business people too, who, in a strict sense, weren’t even business people, they were influence peddlers,” López Obrador said.

With reports from El Universal

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