Page 5 - LatAmOil Week 27 2022

LatAmOil COMMENTARY LatAmOil

Consistently behind schedule Then in April of this year, Energy Minister Rocio
Pemex will not have an easy time realising these Nahle, a close political ally of the president,
lofty ambitions. stated that the bill was likely to total $9.8bn as a
For one thing, the project is running years result of Pemex’s decision to expand the scope of
behind schedule and not likely to catch up any work to include additional infrastructure facili-
time soon. Indeed, the delays still appear to be ties such as an aqueduct and a power plant. And
accumulating, as the Olmeca refinery was not then in late June, Lopez Obrador said the cost
actually producing gasoline on launch day. would probably reach $11-12bn.
Government and company officials had been This upward creep in the official numbers has
insisting as recently as April that the plant been fairly modest in scope. Other observers,
would be able to start regular commercial oper- however, concluded some time ago that Olmeca
ations, including gasoline production, on July 1 was likely to be considerably more costly than
as planned. However, Lopez Obrador said last expected. By early 2022, sources familiar with
month that Pemex was now aiming to begin the situation were telling Bloomberg that they
turning out gasoline in early 2023. believed the final bill might rise to $12.5bn. Then Pemex seems
This target date may also turn out to be sadly in May, Reuters cited sources close to the pro-
premature. Industry experts told El País last ject as saying that Pemex might have to spend as to have brought
week that they did not expect Olmeca to achieve much as $14.5bn on the refinery. Olmeca online
full gasoline production capacity of 170,000 bpd The figures mentioned by the news agencies’
until at least late 2023 – and that the plant would sources may actually be closer to the numbers primarily for
probably not start processing oil at its full design that Pemex’s management expects to see. The
capacity of 340,000 bpd until 2026. company has not exactly been contradicting public relations
These estimates are hardly surprising, given what Lopez Obrador and Nahle are saying in
that workers involved in building the plant were public, but it does appear to have come to differ- purposes
quoted by El Economista as saying last week that ent conclusions when working in more private
construction was only a little more than 35% settings.
complete as of July 1. They are also consistent For example, Pemex itself said in its 2020
with past occasions, when outside observers annual report, published in early 2021, that the
have expressed skepticism about Pemex’s abil- cost of the plant might be as high as $12.4bn.
ity to meet its publicly announced deadlines Reuters also said in May of this year that it
and have in return received assurances that the had learned of the $14.5bn cost estimate from
Olmeca project remained on track, only for the government documents as well as unnamed
NOC or Mexico City to reveal later that there sources.
would be another delay after all. In short, the NOC seems to have brought
Olmeca online on July 1 for public relations pur-
Consistently over budget poses – not because the plant was finished and
A similar dynamic appears to have emerged ready to start operating, not because the plant’s
with respect to the cost of the project. budget was under control and certainly not
That is, Pemex and the presidential admin- because the plant was ready to perform the task
istration insisted for quite a long time that the assigned by the president. As such, it is debata-
final price tag for Olmeca would not exceed the ble whether Lopez Obrador will truly be able to
original estimate of $8bn. Nearly two years ago, claim the refinery project as one of his achieve-
though, it moved the figure upward to $8.9bn. ments when his term in office ends in 2024. ™

Opening ceremony with multiple construction cranes in the background (Screenshot: Twitter/@lopezobrador)

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