UPDATE 1-Cost of new Mexican oil refinery rises to $9.65 bln

(Recasts with detail on investment cost estimates)

MEXICO CITY, Nov 6 (Reuters) - Mexico's state oil company Pemex said on Friday its new oil refinery would cost approximately $700 million more than previously estimated.

Pemex [PEMX.UL] said the new refinery, which would boost crude oil processing capacity by 250,000 barrels per day when completed in 2015, will cost 129 billion pesos ($9.65 billion).

The company also said it would invest 5.752 billion pesos in 2010 in the project as it begins detailed engineering.

Pemex had previously estimated the cost of the new refinery at $8.95 billion when the plan to build a new plant next to an existing refinery at Tula was announced in April.

A Pemex spokeswoman did not have an explanation for the cost increase, although Pemex executives have been careful to stress that its previous cost estimates were preliminary.

Pemex also plans to modernize the refinery in the central city of Salamanca at the same time as it builds the new refinery at Tula. The two projects will virtually eliminate the production of fuel oil at the two refineries and boost Mexico's output of motor fuels.

Mexico has become increasingly reliant on imported gasoline in recent years as soaring demand has outstripped domestic refining capacity.

Pemex did not provide an updated estimate of the cost of the Salamanca overhaul. The company said in April the modernization would require $3.076 billion in capital spending. ($1 = 13.37 pesos) (Reporting by Robert Campbell; Editing by Lisa Shumaker)