Dos Bocas refinery: López Obrador's big sexennium project faces a long interrogative path

The refinery that Mexican President Andrés Manuel López Obrador plans to build in his home country, Tabasco, to import less gas He faces serious questions from experts who say the project could be expensive and unnecessary.

The leftist government believes that the refinery will be ready in about three years and will cost about $ 8,000 million and the ability to process 340,000 barrels a day.

However, specialists see the estimate very optimistic. The budget "It does not give or for a third of what they expect to do", badyst Gonzalo Monroy told AFP.

"The preparation of the ground takes between 18 and 24 months, we talk about eight years (construction), baduming that everything went well", he added.

In addition, "new refineries could end up costing several times the originally budgeted amount"said the rating agency Moody's in a July report.

The work is framed in a nationalist approach of the energy sector in Mexico.

López Obrador promised to "save" the oil industry and pointed to the previous government's energy reform – which opened up the sector to the private sector for the first time in over 70 years – as a failure to reverse the decline in oil production. Pemex State Oil.

The project "gives the sign of a more interventionist energy policy"says Edward Glossop, an badyst at British firm Capital Economics.

The refinery, which will be located in Dos Bocas, Tabasco (South), seeks to increase domestic production of fuels and reduce imports.

The six refineries owned by Pemex in Mexico have a refining capacity of 1.6 million barrels of crude oil per day, where gasoline and petroleum products are obtained as turbosine, diesel and fuel oilalthough they operate at 30% capacity due to lack of investment.

As a result, imports of Pemex near 70% of the essence consumed in the countryand the government promised to rehabilitate refineries to increase fuel production.

Government doubts
The project generated confusion on the market on more than one occasion.

In March, Under-Secretary of Finance Arturo Herrera told the British Financial Times that he would delay the construction of the works to destine 2.500 million dollars increase the production of Pemex.

López Obrador himself contradicted the official at the to ensure that there is no delayand announced the tender for the project on March 18th, as it finally happened.

The date was not laid back. This day is commemorated at Mexico the expropriation of oilwhen in 1938 the government of the time President Lázaro Cárdenas nationalized this industry.

In addition, at the end of January, the newspaper Reforma published a study of the State Mexican Institute of Petroleum (IMP) announcing that the project would cost $ 14.740 millionalmost double the government estimate.

The following day, López Obrador said that the study was unfounded; IMP himself said at the end in a statement that the project was viable.

The eye on Pemex
With declining oil production, Pemex is in the crosshairs of rating agenciesdespite the government's promises to support it.

Fitch reduced the rating of Pemex at the end of January in two stages, leaving a step of the degree speculative or "garbage".

The production of the company has gone from 3.4 million barrels a day in 2004 at an average of 1.8 million barrels per day today.

The agencies warn that the resources the company has to be for exploration and production.

"What the rating agencies are questioning, is:" if you are going to make a refinery, do you have enough money to get the hydrocarbon that covers your internal demand and that of? 39 export?said specialist Ramses Pech.

Pech warns that, in the event that existing refineries operate at 70% capacity in the near future, he would stop exporting much of the oil which is currently sent abroad, which would affect the revenues of the government.

"Do you think the Income Law supports that?", he says, referring to the law where resources are established that each year He hopes to get the government through taxes and oil exports.

Other options
Experts offer optional The Dos Bocas project is developing in refineries already existing or sell those that do not work.

They are also considering buying a refinery in the United States. Pemex has experience in this field She is co-owner of a refinery in Texas with the Anglo-Dutch group Royal Dutch Shell.

Another possibility is to build modular refineries, smaller facilities placed next to oil well it can produce faster.

"These are much more automated processes that could turn out to be a better option for Pemex, but you obviously can no longer defend the idea of ​​a construction of a work in political terms."said Gonzalo Monroy.