AMLO Concedes Dos Bocas' Cost Increase, Offers Justification

President López Obrador confirmed Tuesday that the construction of the Olmeca refinery at Dos Bocas had indeed almost doubled its initial budget with the total cost not estimated to exceed US$15 billion. On the same day, PEMEX's Board of Directors confirmed they had requested an additional US$6 billion two weeks ago to complete unfinished work on the government’s flagship energy project, a revelation that Reuters had previously leaked at the start of this month, raising concerns about Dos Bocas’ soaring costs. 

The President, nevertheless, justified increased cost due to what he described as "necessary equipment expenses that were not originally factored into the budget" before providing assurances that the public need not worry about the inflated expenditure: since Dos Bocas is not a project for personal gain, it is therefore not susceptible to corruption. López Obrador was also keen to underscore that despite the increased budget, the construction overseen by SENER has still been cheaper than what private contractors had previously proposed. "Even if we have to spend another US$2 or US$4 billion on [the refinery] it will still work out cheaper than what foreign companies wanted to charge us,” he said. Moreover, the president insisted that construction of the refinery "is already finished,” something which he believes would not be the case if Dos Bocas was left in the hands of the private sector.

In June 2022, President López Obrador had previously conceded that the cost of Dos Bocas would indeed exceed the October 2020 budget of US$8.9 billion, which itself was already an increase of almost US$1 billion from the initial budget set in 2018. Nevertheless, when Bloomberg reported that the cost would likely rise to as much as US$18 billion, López Obrador rejected this figure as an exaggeration. He claimed that the refinery only required an additional 30 percent increase in investment, putting the final cost somewhere between US$11 and US$12 billion.

 Energy Minister Rocío Nahle responded by confirming that Dos Bocas’ cost would not surpass the US$12 billion figure. However, this latest request from the PEMEX board, of which Nahle and Finance Minister Rogelio Ramírez are members, smashes that investment ceiling. While Reuters’ leak puts the price tag at US$14.6 billion, this could be inflated even higher with the addition of taxes, contingencies and additional construction works still due to take place to get the flagship energy project online. The Olmeca Refinery, as it is officially known, was inaugurated by PEMEX CEO Octavio Romero and President López Obrador to much fanfare on June 1, 2022. However, the refinery is not expected to start producing until the middle of 2023.

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