Dos Bocas Development Once Again Generates Diverging OpinionsBy Kristelle Gutiérrez | Fri, 05/13/2022 - 18:51
When the Mexican Congress’ Energy Commission visited the Dos Bocas’ oil refinery last week, Minister of Energy Rocío Nahle shared the latest developments regarding the refinery located in Paraíso, Tabasco, in order to verify that the approved resources were adequately used to further the government’s flagship project. Nahle reported good news, but experts remain concerned about the project’s ballooning budget excess.
Among the members of the Energy Commission that joined Nahle for the visit were members from the Parliament’s Energy Commission: Verónica Camino, Guadalupe Covarrubias, Alejandro Armenta, Carlos Ramírez and Ernesto Pérez Astorga, in addition to local Senator Mónica Fernández Balboa. Nahle emphasized that the complex has an overall development completion of 87 percent and is ready to be inaugurated in July 2022.
Notably, the same strategy that has enabled the development of the Dos Bocas refinery is the administration’s objective to achieve energy sovereignty. Mexico would start reducing its crude oil exports down to nothing by 2023, a strategy enhanced by the mediatized endeavor to rehabilitate six other working oil refineries in Mexico, in addition to the acquisition of the Deer Park refinery and the construction of Dos Bocas.
In this regard, MORENA Senator and Chairman of Congress’ Finance and Public Credit Commission (SCHP), Alejandro Armenta Mier, confirmed the relevance of such efforts, as it is “evidence that [the President] has a patriotic and nationalist vision that contributes to the development and growth of the country, as it has been more than thirty years since a refinery of this scale was built.”
Recently, however, the Ministry of Energy has been criticized for exceeding the Dos Bocas budget by spending 578 percent more than what was originally approved in 2021, raising the original US$2.31 billion to US$15.69 billion. According to Animal Político, the finance ministry has also not been transparent enough regarding the budget.
Furthermore, some industry experts expressed their concerns about the viability of the refinery and whether the expectations set by the administration would be met in the short term, considering its overwhelmingly high excess costs. In a recent study that analyzed about 30,000 possible scenarios using a simulation model to obtain the Internal Rate of Return (IRR) and the Net Present Value (NPV), the Mexican Institute for Competitiveness (IMCO) concluded that the Dos Bocas refinery’s probability of being profitable is merely 2 percent.
In addition, México Evalúa analyzed the risk and irregularities present in the development of the refinery so far. Research collective México, ¿cómo vamos? further determined that there was a “lack of an investment business case because PEMEX had kept some information private,” adding that the NOC began construction without having an Environmental Impact Statement (MIA) ready.