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Mexico new oil refinery likely to far exceed budget

May 15/2019

MOSCOW (MRC) -- The new refinery that Mexico’s government has tasked state oil company Pemex to build will likely cost at least USD2 billion to USD4 billion more than the government estimates due to its “limited know-how,” credit rating agency Moody’s said.

Last week, Mexican President Andres Manuel Lopez Obrador said the refinery, slated to be built at the Gulf coast port of Dos Bocas for USD8 billion, will break ground early next month and be completed by May 2022.

The ratings agency described the decision to build the refinery without private sector expertise as one that would be “costly."

"Given the government’s (and Pemex’s) lack of experience in building refineries, the project is likely to end up costing more and taking longer than the government anticipates, placing further strains on fiscal resources,” Moody’s said in a statement.

The project, one of Lopez Obrador’s top priorities, 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.

Moody’s said the decision raised further questions about the predictability of the government’s decision-making, pointing to the negative reaction to Lopez Obrador’s cancellation of a part-built USD13 billion new Mexico City airport last October.

"His government’s pledge to maintain fiscal responsibility appears increasingly in tension with its ambitious social and infrastructure spending agenda,” Moody’s said. The implications for Mexico’s credit profile will partly depend on whether it continues to undermine market confidence, hurting its economic prospects, the agency added.

The leftist president has defended the project as needed to make Mexico more self-sufficient in production of gasoline, and wean the country off growing fuel imports. Earlier on Monday, Lopez Obrador unveiled a new financial package with major banks designed to improved Pemex’s balance sheet and head off a fresh ratings downgrade of the firm.

The measures include USD2.5 billion in debt refinancing and a renewal of USD5.5 billion worth of credit lines.
Author:Anna Larionova
Tags:petroleum products, petrochemistry, Crude oil.
Category:General News
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