Tuesday, June 25, 2024

Internal audit says Dos Bocas refinery will miss July start deadline

The Dos Bocas refinery won’t make its announced July deadline to start production, according to an internal audit seen by Reuters. 

As recently as March, President López Obrador predicted that the refinery, located on the Gulf Coast of Tabasco and owned by the state oil company Pemex, would be producing gas by the middle of 2023. However, the audit report dismissed this estimate. 

Dos Bocas refinery, Tabasco
The enormous Dos Bocas refinery in Tabasco is one of the president’s key infrastructure projects and a centerpiece of his nationalistic energy policy. (Gob MX)

“The trend of the works carried out for an early start-up, proposed for July 2023, is not feasible,” the audit report said. 

The refinery was inaugurated in July of last year, even though the facility was not yet complete. 

The audit, which corresponds to the first quarter of 2023, noted that no progress has been made in the construction of important elements of the combined distillation plant, including the delayed coking unit and the fluid catalytic cracker unit, both of which are key to the facility’s operations. 

According to the project schedule, the two units should have been completed in December. Neither the Ministry of Energy (Sener), which is overseeing the project, nor Pemex has commented on the delay. 

AMLO inspects Dos Bocas.
The site was originally intended to have been completed no later than December 2022, but construction delays have meant that the refinery is still not functional. (Presidencia/Cuartoscuro)

While Energy Minister Rocio Nahle initially set its opening date for December 2022, the plant has been subject to extensive delays and cost overruns, with the budget doubling from the 2020 estimate of US $8.9 billion. 

According to the audit, total contracts now amount to US $16.9 billion, US $927 million more than what was approved in August 2022. 

Jorge Andrés Castañeda Morales, son of political commentator and former foreign affairs minister Jorge Castañeda Gutman (2000-2003) and founder of the consulting firm Kairós Asociados, told the website MVS Noticias that Dos Bocas’ cost overruns and delays can be attributed to inadequate planning. 

“It has to do with how you plan a project of this magnitude: there are thousands of workers, [and] anything can go wrong. Even when the project was first tendered, everyone backed away because it could not be done within that budget, so the Energy Ministry was appointed,” he said. 

In 2019, the federal government scrapped the project’s bidding process because estimates were too high and bidders’ proposed timelines were too long. The bids ranged from US $10 to $12 billion, and companies proposed timelines that would exceed President López Obrador’s six-year term. 

Castañeda noted that some press reports are putting the refinery’s end cost close to US $20 billion and stated that there is “a 2% chance that the project will be profitable.” 

The refinery — officially called the Olmeca refinery — is one of the president’s key infrastructure projects. When completed, it is expected to process 340,000 barrels per day (bpd) of oil and produce 280,000 bpd of gasoline and diesel. 

The president considers the refinery key in achieving energy self-sufficiency in Mexico, lessening the country’s dependence on imports while boosting domestic fuel production. 

With reports from Reuters, Aristegui and MVS Noticias

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