Costa Rica halts Chinese-backed plan for refinery upgrade

SAN JOSE, Costa Rica, June 20 (Reuters) - Costa Rica has halted its Chinese-backed plan for a $1.5 billion oil refinery upgrade after accusing the contractors of using a subsidiary of the China National Petroleum Corporation to run a feasibility study on the project, officials said on Thursday.

Cost Rican Energy Minister Rene Castro told reporters Costa Rica’s Comptroller’s Office considered the company that carried out the study, Huanqiu Contracting & Engineering Corp, a unit of CNPC, which has been working jointly on the plan with Costa Rican state-run oil company Recope.

“We found the project breached one of the clauses in the joint company agreement because the feasibility study ... was done by a firm associated with the Chinese state-run oil company, something expressly forbidden in the same agreement signed by both companies”, said Navil Campos, head of the investigations department at the comptroller’s office.

The plan to modernize the refinery in Moin, next to the Caribbean port of Limon, is aimed at improving the quality of the refined fuel and seeks to increase production at the refinery to 65,000 barrels per day from 18,000 bpd.

Huanqiu Contracting & Engineering Corp could not be reached for comment about the decision. The company’s website has a link to CNPC.

Campos said other deficiencies were found in the feasibility study, including its failure to include an estimate of the overall cost of the upgrade or risk analysis.

A few hours after the announcement, Recope’s head Jorge Villalobos resigned, Castro said.

The Costa Rican government said Recope had been instructed to find another company to undertake the feasibility analysis. Castro said that “it was still a possibility” for the project to go ahead jointly with CNPC.

The suspension of the project follows a visit to Costa Rica by Chinese President Xi Jinping in early June, when the Costa Rican government said it was not ready to sign off on the upgrade. (Reporting by Isabella Cota; Editing by Mohammad Zargham)