La Oferta

March 22, 2023

Four Companies to bid on new Mexico oil refinery

The President of Mexico Andres Manuel Lopez Obrado (L), and the Secretary of Energy Rocio Nahle Garcia (R) participate in the commemoration of the 81th anniversary of the oil expropriation, in Tula, in the state of Hidalgo, Mexico, 18 March 2019.

Mexico City, Mar 18 (EFE).- Four international companies will compete in a restricted bidding process for the construction of a new refinery in the Gulf coast state of Tabasco, Mexico’s government said Monday.

“Today will be very important. The bidding process begins for the construction of the new refinery in Dos Bocas,” Mexican President Andres Manuel Lopez Obrador said at a press conference here on the 81st anniversary of then-head of state Lazaro Cardenas’ move to nationalize Mexico’s oil industry.

Energy Secretary Rocio Nahle said that only four companies have been invited to participate, adding that they were the “best in the world for a project of this size.”

She said the refinery, which will be Mexico’s seventh, will have the capacity to process 340,000 barrels per day.

The work on the Dos Bocas refinery will involve building 17 processing plants, electrical energy and auxiliary service plants, a link to the Dos Bocas maritime terminal, gas pipelines, a railway, and hydraulic, sanitation and urban development works.

The government estimates that the final cost of the refinery will be between $6 billion and $8 billion.

Nahle also said progress was being made on a rehabilitation plan for Mexico’s six existing domestic refineries.

Lopez Obrador said his administration has the goal of “rescuing the national oil industry,” although he has vowed to respect contracts signed since predecessor Enrique Peña Nieto’s landmark 2013 energy-sector overhaul ending state oil company Petroleos Mexicanos’ production monopoly.

Pemex reported a net loss last year of $7.55 billion, although that was an improvement over the company’s $14.27 billion net loss in 2017.

The company, which held around $106 billion in financial debt at the end of last year, is in a difficult situation due to, among other reasons, a steep drop in production to an average of just 1.71 million barrels per day in December (down from an average of 3.38 million bpd in 2004).

It also suffers from aging infrastructure, while budget cuts by the previous government slashed funds needed for oil exploration.

In the same press conference, Pemex CEO Octavio Romero projected that oil production will climb to 2.48 million bpd by the end of Lopez Obrador’s six-year presidency due to greater investment in oil rigs, pipelines and offshore and onshore wells.

He said that when Lopez Obrador took office on Dec. 1, 2018, daily domestic production stood at 1.73 million bpd and continued to fall until the start of March.

But he added that production has risen slightly since March 8.

“The drop has been halted and a slight rebound can be expected,” Romero said, adding that output by private companies after the energy-sector overhaul remains very small (31,000 bpd).

In February, Mexico’s government unveiled a 107-billion-peso ($5.5-billion) assistance plan in 2019 for Pemex.

The actions include a cash injection, the assumption of pension liabilities, tax relief and efforts to battle the theft of fuel from Pemex-owned pipelines.