Mexico's state-owned Pemex told its board of directors costs for the planned 340,000 b/d Dos Bocas refinery could soar by roughly 40pc, and the business case should be reformulated, as payments are coming due and the timeframe established by the government will not be met.
The Dos Bocas refinery could cost up to $12.4bn, up from the latest $8.9bn budget, which was already adjusted from an original $8bn cost, according to Pemex's 2020 annual report.
Analysts and credit rating agencies consulted by Argus previouslywarned the refinery would at least cost $12bn based on international projects of similar scale.
The company also said the government's much-touted 1 July 2022 start date will be for trial runs and mock starts — in the best case scenario — and not a real commercial start date.
"Trial runs must be done by mid-2022, but it will be necessary to reformulate the project, in particular the internal rate of return and the net present value," according to Pemex.
President Andres Manuel Lopez Obrador's controversial strategy of making Mexico self-sufficient for fuel supply is based heavily on the construction of the financially and technically challenging refinery. He has vowed repeatedly that the refinery would not cost more than $8bn, and "I will change my name" if the refinery was not inaugurated on 1 July 2022.
Through the end of 2020, 19.5pc of the refinery's physical and financial work had been done, according to Pemex's 2020 annual report seen by Argus, and delivered by chief executive Octavio Romero to the board.
With 18 months of the 36-month project elapsed by December, the 19.5pc milestone seems to indicate slow work on the project.
Energy secretry Rocio Nahle said the project was 24pc complete in October 2020.
