Thursday, February 29, 2024

President contradicts finance official who said new refinery delayed

Although a senior official in the Finance Secretariat said otherwise this morning, construction of the Dos Bocas oil refinery in Tabasco will not be postponed.

Undersecretary Arturo Herrera told the British newspaper the Financial Times that US $2.5 billion allocated to the project would instead be directed into Pemex as a fresh capital injection to boost production.

But a few hours later President López Obrador said the project will go ahead as planned.

He said the refinery represents an important part of the government’s agenda.

“There are no setbacks in the construction. Everything is going ahead smoothly and the refinery will be built. It will be finished in three years’ time as promised, and it will cost between $6 billion and $8 billion.”

The president reiterated that on March 18 the federal government will announce a tender for the project. The date is symbolic: it is the anniversary of the 1938 nationalization of the oil industry.

Energy Secretary Rocío Nahle confirmed later that refinery costs are included in the 2019 budget.

“This is a project that we need in this country, and not just as of now. Talks with Pemex, Conagua [the National Water Commission] and other organizations have been going on for a long time.”

Nahle said undersecretary Herrera’s earlier statements reflected adjustments that are being made to the budget “so that there’s enough money for everything, but the project is already under way and we are going ahead with it.”

She also said she expects Herrera will retract his comments.

Herrera also said this morning that the government is committed to its target of delivering a budget surplus equal to 1% of gross domestic product.

“If anything has to be adjusted,” he told the Times, “it won’t be the fiscal target.”

The mixed messages generated some uncertainty among analysts, many of whom already see the refinery project as a poor use of money.

Mexico City energy analyst Alejandra León at IHS Markit told Bloomberg “it sounds contradictory” and “there is no clarity on what the president has in mind.”

Energy trader Rajan Vig said “ultimately, no one communicates with one another” within the government team.

Source: El Financiero (sp), Financial Times (en), Bloomberg (en)

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