Mexican president to open oil refinery far short of completion

Mexico's President Andres Manuel Lopez Obrador gestures during a news conference at the National Palace in Mexico City, Mexico, June 20, 2022. REUTERS/Edgard Garrido/File Photo

MEXICO CITY, June 28 (Reuters) - Mexico's president will inaugurate on Friday a new oil refinery at the heart of his plan to make the country energy self-sufficient even though it is unfinished and two people familiar with the matter said it will only be running near capacity in 2025.

In 2019, President Andres Manuel Lopez Obrador and Energy Minister Rocio Nahle said the refinery in the southern port of Dos Bocas would be ready in 2022 for $8 billion, in defiance of oil industry predictions that that goal was not feasible.

Lopez Obrador, a left-leaning energy nationalist, last week conceded the refinery would cost more, putting the price tag at some $12 billion. But he emphasized the refinery would be producing gasoline "at full capacity" next year.

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Still, three people familiar with the project, including a source at state oil firm Petroleos Mexicanos (Pemex), say it will cost billions more to complete, and take longer.

The Dos Bocas refinery is one of the flagship projects of Lopez Obrador, who said his vision has been vindicated by disruptions in energy supply caused by the war in Ukraine.

But the president will only inaugurate the first stage of the complex of 17 plants whose construction Pemex is overseeing. The so-called Olmeca refinery is due to have processing capacity of up to 340,000 barrels per day (bpd).

Two of the sources said the energy ministry does not expect the refinery in the president's home state of Tabasco to reach 80% capacity until late 2025 or even 2026.

Neither Pemex nor the ministry replied to requests for comment.

A third source familiar with planning said the refinery would not be completely ready before spring 2024, underlining the risk that it could be producing well short of capacity by the time Lopez Obrador leaves office on Sept. 30, 2024.

The Pemex source agreed that it would not be in operation before 2024 even if the infrastructure was complete.

That is because many contracts with companies working on the refinery are due to run until then, the source said.

"So it's not going to be ready, and you have to add on months of testing," the source said.

Energy Minister Nahle earlier this month declined to say when the refinery would produce its first barrel of gasoline, pointing to the complexity of the project.

"I don't want to give a date because it would be irresponsible," she told Mexican radio.

Pressed on whether it could be in a year, she said: "A year is a reasonable amount of time, I'd like to do it sooner".

Lopez Obrador wants to ramp up Pemex's total refining capacity to between 1.8 million and 2 million bpd, counting Mexico's six refineries, plus Olmeca, and Deer Park in Texas, so he can cease to import gasoline from abroad by next year.

That goal still looks ambitious.

Pemex data show that in the first five months of 2022, average processing output at the six domestic refineries was just shy of 828,493 bpd, barely half of their combined capacity. Deer Park's output meanwhile stood at 282,000 bpd of crude.

The six domestic plants produced 288,000 bpd of gasoline, a figure that compared with imports of 368,700 bpd and total domestic sales of the fuel of 656,600 bpd, the data show.

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Reporting by Ana Isabel Martinez Additional reporting by Dave Graham Editing by Alistair Bell

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