By Charles Kennedy – Jun 24, 2024, 9:30 AM CDT
Mexico’s newest refinery, the long-delayed Olmeca processing facility with a planned capacity of 340,000 barrels per day (bpd), is unlikely to be ready to produce commercial quantities of fuels by the end of this year, five sources familiar with the operations told Reuters on Monday.
The Olmeca refinery, also known as Dos Bocas, is a flagship project of outgoing Mexican President Andrés Manuel López Obrador, who sought to reduce Mexico’s dependence on fuel imports from the United States.
The refinery, however, has seen multiple delays and budget overruns and is now estimated to have needed double the initial budgeted investment. Initially budgeted at $8 billion, the refinery went into significant cost overruns, with the price tag to date standing at some $18 billion and the start date still unclear.
Olmeca is set to boost Mexico’s current refining capacity by about 20%, but this will not happen in López Obrador’s term in office, according to Reuters’ sources. López Obrador’s successor, President-elect Claudia Sheinbaum, will take office on October 1 and will see the refinery begin commercial production of fuels.
Just last week, Pemex’s chief executive Octavio Romero said that the refinery would begin crude oil processing in the second half of this year. The facility is expected to significantly enhance the company’s domestic processing capabilities, with a target to process 163,000 bpd by the end of the year. This forms part of a broader strategy to increase Pemex’s overall refining capacity to 1.44 million bpd. The refinery is expected to produce a significant portion of its output in diesel, gasoline, and jet fuel. By September, just before President López Obrador leaves office, the refinery aims to ramp up its production to 274,000 bpd.
However, Reuters’ sources say that it would be impossible for the new refinery to meet these goals and that the progress toward start-up was exaggerated ahead of the presidential election early this month.
By Charles Kennedy for Oilprice.com
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