The construction of Mexico’s Dos Bocas oil refinery is running $3.6 billion over budget and delays could mean that the flagship project of Mexican President Andrés Manuel López Obrador may not start operations this year and not even in time for the state oil firm’s plan to end oil exports in 2023 and focus on refining fuel domestically.
Dos Bocas is the favorite project of López Obrador for weaning the country off fuel imports. Originally, the plan for the refinery in López Obrador’s home state of Tabasco was expected to cost US$8 billion. Even when it was announced, analysts doubted the budgeted costs would be sufficient and were not optimistic about the financial viability of the refinery.
Back in 2019, the Mexican Institute for Competitiveness (Instituto Mexicano para la Competitividad, or IMCO for short) released a damning financial analysis of the Dos Bocas refinery, currently being developed by state-owned oil company Petróleos Mexicanos (Pemex). The institute gave the project a mere 2 percent chance of success. Highlighting the disastrous findings of the financial analysis, a report accompanying the results warns that if Mexico goes through with the Dos Bocas project, it “could generate a serious crisis for the public finances of the whole country.”
The Dos Bocas refinery is a key pillar of López Obrador’s plan to revive the Mexican state-owned firm Pemex and ensure the so-called “energy independence” for Mexico.
However, costs for the refinery are now expected to have soared by 40 percent, to around $12.5 billion, sources familiar with the situation told Bloomberg on Friday.
The refinery is expected to be inaugurated in July this year, but analysts think it may not be able to produce any gasoline in 2022 and even in 2023 and 2024.
“Unfortunately there’s a big discrepancy between the government’s expectations and reality,” Felipe Perez, an IHS Markit Latin America analyst, told Bloomberg, noting that it’s possible Dos Bocas might not produce fuels before López Obrador’s term in office ends at the end of 2024.