Dos Bocas 40% over budget, likely to miss completion deadline: report

The Dos Bocas refinery – one of the federal government’s signature infrastructure projects – is expected to cost 40% more than Pemex’s most recent estimate, according to a report by Bloomberg.

The news agency also reported that the refinery, currently under construction on the Tabasco coast, is likely to miss the government’s 2022 completion deadline. A delay in the commencement of operations at the 340,000-barrel-per-day facility could jeopardize plans to reach self sufficiency for fuel by the end of 2023.

Blomberg said it had been informed by people with knowledge of the situation that construction of the facility is now projected to cost US $12.5 billion – $3.6 billion, more than the $8.9 billion estimate offered by Pemex CEO Octavio Romero in late 2020.

The increase was attributed to “construction delays, rising materials costs, and a budget that may have been unrealistic from the start.”

Analysts cited by Bloomberg said the refinery may not produce any fuel at all in 2022 and only limited amounts in upcoming years.

Energy Minister Rocío Nahle told the news agency last August that Dos Bocas was on schedule to commence startup tests this July and to begin operations a few months after that. She also said the projected cost of the refinery was within the $8.9 billion budget cited by Romero, give or take 10%.

After last Friday’s publication of Bloomberg’s report – published in Spanish by the news agency’s partner El Financiero and other media outlets – Nahle said on Twitter that the facility was being built in “record time.”

“Opinions around the world are very positive. Today there are again speculative, alarmist and biased articles in some national media outlets. The sources are people who don’t even know the project,” she wrote.

“… Those who disseminate and produce said articles are first and foremost seeking to insult our national oil company and the Mexican state,” Nahle said.

Bloomberg’s budget blowout assertion is based on the assumption that the refinery won’t be finished this year and the possibility that funding allocated for the project this year could increase.

A total of $8.1 billion has been allocated to the project, including $2.2 billion for construction this year. The initial allocation for 2021 was also $2.2 billion but the government ended up giving Pemex just under $4 billion in funding for the refinery.

Bloomberg predicted that the $8.9 billion estimate will be exceeded even if this year’s funding isn’t increased.

“If it keeps to its planned spending rate going forward and construction continues into 2023, it will almost surely blow past its previous budget estimates,” it said. 

The news agency reached its operational delay prediction after analyzing more than 100 videos on the construction of the refinery that have been posted to YouTube by the Energy Ministry.

The videos make “no mention of water and gas connections being completed at Dos Bocas, nor of pipeline connections to bring crude oil to feed the distillation towers,” Bloomberg said. 

“In the videos, there are no images of construction of a marine terminal to distribute gasoline and diesel to other Mexican states,” it added. 

A tank farm containing 90 tanks for fuel storage and an administrative building did appear to be “on track to open for business by July,” Bloomberg said. 

“… The Mexican government plans to inaugurate the Dos Bocas facility with pomp and circumstance in July. Yet, much like the flashy video clips documenting the refinery’s construction, the event is likely to be more show than substance,” it said. 

Felipe Pérez, a Latin America analyst at information services company IHS Markit, told Bloomberg that it’s possible that the refinery won’t produce fuel before President López Obrador leaves office in September 2024. 

“Unfortunately there’s a big discrepancy between the government’s expectations and reality,” he said. 

With reports from Bloomberg