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Colombia to complain to CB&I about multi-billion-dollar refinery overruns
February 10, 2016 / 4:25 PM / 2 years ago

Colombia to complain to CB&I about multi-billion-dollar refinery overruns

BOGOTA, Feb 10 (Reuters) - The Colombian government is preparing a complaint against contractor Chicago Bridge and Iron NV, which directed construction on the newly renovated Reficar refinery, after accusations bad management sent the project some $4 billion over budget.

The refinery, part of state-run oil company Ecopetrol , reopened late last year after a multi-billion-dollar overhaul meant to increase its capacity from 80,000 barrels per day to 165,000. Once operating fully it will produce diesel, naphtha, liquefied petroleum gas, jet fuel and petroleum coke.

“We know that a good part of the cost overruns are down to failures on the part of CB&I,” Finance Minister Mauricio Cardenas told journalists, referring to the Texas- and Netherlands-based contractor by its initials.

“We have hired a team of lawyers who have spent a long time preparing all the arguments to make this complaint.”

Cardenas said the government was aware of the overruns for years but chose not to delay construction by revoking the contract.

A large part of the overruns could be due to lack of proper cost estimates at the beginning of the project, Cardenas said.

“But another component could be bad management,” he said. “Where that has occurred, we are completely committed to seeing it reach final consequences.”

Chicago Bridge and Iron NV did not immediately respond to a message from Reuters seeking comment.

The original cost projection for the renovations was $4 billion. The country’s comptroller estimates final costs came in at $8 billion, although the head of Ecopetrol said Wednesday that the final cost was still being calculated.

Authorities from the attorney general’s office visited Reficar’s Bogota headquarters late on Tuesday in connection with the allegations of mismanagement.

“Reficar has given all its cooperation to the authorities who came to our offices,” the refinery said in a statement. “Reficar reaffirms it is the most interested in clearing up doubts about the project.”

The accusations of mismanagement have sparked a war of words between officials from the government of former President Alvaro Uribe, which began the refinery construction, and members of the administration of his successor, Juan Manuel Santos.

The government has estimated the refinery will account for 1 percent of Colombia’s gross domestic product and generate between $600 million and $700 million in cash flow per year. (Reporting by Julia Symmes Cobb and Nelson Bocanegra Additional reporting by Carlos Vargas; Editing by Bill Trott)

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