A Review of the Nigerian Energy Industry

Report says $2.5 bln for Mexico refinery can go to Pemex, but Lopez Obrador says no

Report says $2.5 bln for Mexico refinery can go to PemexMexico City — Mexico’s deputy finance minister was quoted on Tuesday as saying $2.5 billion earmarked this year for construction of a new oil refinery will be moved to state oil firm Pemex, but President Andres Manuel Lopez Obrador denied there was any plan to delay the refinery.

The planned investment for the Dos Bocas refinery “can go to exploration and production” for Pemex, Arturo Herrera told the Financial Times in an interview during a trip to London for meetings with investors.

However, Lopez Obrador stood by his plan to build the refinery within three years, and in answer to a question about whether the $2.5 billion would be spent this year on the refinery, said “Yes.”

The president’s plans to fast-track construction of the new refinery in Tabasco, his home state, have concerned investors that it would take away much-needed resources from heavily indebted Pemex.

The Mexican peso and benchmark stock index both weakened after Lopez Obrador’s rebuttal of Herrera’s comments triggered confusion about the government’s position.

The government is under growing pressure to dispel doubts Pemex can successfully manage more than $16 billion of debt payments due by the end of next year, halt the firm’s extended oil output slide and avert a threatened credit rating downgrade to “junk.”

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Finance minister Carlos Urzua said last week the government would announce new measures to support the ailing company, after unveiling a $3.9 billion bailout in February that failed to impress ratings agencies.

Lopez Obrador said it was very likely the government would make an announcement about tenders for the refinery on March 18, a national holiday that celebrates the 1938 nationalization of Mexico’s oil industry.

He repeated that the refinery would cost between $6 billion and $8 billion, and said that work for now was focused on preparing the ground at the refinery site and readying the framework for the tender.

Herrera said the tender framework was being prepared, but said the finance ministry needed to see a solid financial plan before releasing funds.

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“We will not authorize (construction) until we have a final figure that is not very different from the original $8 billion,” said Herrera.

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