Mexican regulator approves Pemex oil refinery construction, with environmental conditions

FILE PHOTO: A sign of state-owned company Petroleos Mexicanos (PEMEX) is seen at a gas station in Monterrey, Mexico June 17, 2019. REUTERS/Daniel Becerril/File Photo

MEXICO CITY (Reuters) - The environmental regulator for Mexico’s oil industry said on Monday it had approved the construction of a refinery for state oil company Pemex, but imposed conditions to mitigate the environmental impact of the $8 billion project.

Mexican President Andres Manuel Lopez Obrador has said the facility planned for the Gulf Coast port of Dos Bocas in his home state of Tabasco would help Mexico wean itself off its growing reliance on fuel imports, one of his signature campaign pledges.

Environmental regulator ASEA approved the project after reviewing a report prepared by Pemex that offered a mostly positive environmental assessment of the refinery’s construction despite predicting a “severe” impact on air quality.

ASEA said Pemex, while building the project, must monitor local water quality, rescue and relocate affected wildlife and protect a mangrove forest, among other mitigation measures.

Slated for completion by 2022, the refinery is expected to process up to 340,000 barrels per day of heavy crude oil.

Lopez Obrador tapped the oil company to oversee the project after deeming bids from engineering groups were too expensive, putting more pressure on Pemex, the world’s most indebted oil company that has struggled to reverse declining output.

However, the project has been repeatedly criticized by investors and ratings agencies due to concerns it will divert funds away from Pemex’s more profitable exploration and production business.

Ratings agency Moody’s has said the new refinery could exceed the budget by $2 billion to $4 billion due to the government’s “limited know-how” on such projects.

Reporting by Adriana Barrera and Marianna Parraga, Writing by Daina Beth Solomon; Editing by Sandra Maler and Richard Pullin