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Mexico starts construction of $7.6B Dos Bocas refinery

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Mexico starts construction of $7.6B Dos Bocas refinery

Mexico began construction of the Dos Bocas refinery under a strong political message and plans to connect the project with the country's fuel distribution network.

On June 2, Petróleos Mexicanos SA de CV, or Pemex, began building the 340,000-barrel-per-day facility, which will supply central Mexico and the country's Pacific Coast via a new fuel pipeline.

"We do not want to be the colony of any foreign nation," Mexican President Andrés Manuel López Obrador said June 2 in a webcast event from Dos Bocas. "This can only be achieved through self-sufficiency."

Developing a refinery at the port of Dos Bocas in the southern state of Tabasco and rehabilitating Pemex's existing refineries will ensure that Mexico will be able to produce all the fuel it needs, López Obrador added.

Mexico imported over 800,000 bbl/d of gasoline and diesel in March, according to government data. The country sources most of its imports from the U.S.

A new 35-kilometer pipeline will connect Dos Bocas with Minatitlan. From there, fuel can flow to Mexico City and the Port of Salina Cruz through existing infrastructure, Pemex said in a statement.

Salina Cruz is a major marine logistics point distributing fuel to Mexico's Pacific Coast. Dos Bocas will be able to supply the Yucatan Peninsula using marine shipments to Puerto Progreso.

Pemex did not mention how work began at Dos Bocas. However, on May 25, the company awarded a dredging contract for the river next to the site of the refinery.

Refining a 'great business'

Dos Bocas will process Maya heavy crude, Mexican Energy Secretary Rocio Nahle said. Maya is Mexico's landmark crude blend with a 3.4% sulfur content and 22 API.

The refinery's expected output is 170,000 bbl/d of gasoline, 120,000 bbl/d of diesel and an unspecified volume of jet fuel and asphalt, Nahle added.

"Fuel production is a great business worldwide. For Pemex, it has represented years of profits and work," the energy secretary said.

Dos Bocas should take five years to pay back its construction costs based on the current profit margins of a 350,000-bbl/d refinery in the U.S., Nahle said.

The construction process for Dos Bocas will involve six tenders, which Pemex will award by the end of June. The project will cost $7.6 billion, of which 33% has already been assigned under Pemex's 2019 budget, Nahle said.

Pemex unsuccessfully tried to award a project management contract May 9.

Among the interested companies were Bechtel Corp., Grupo Techint SA de CV, KBR Inc. and Jacobs Engineering Group Inc. However, none could match the government's demands that the refinery be built in less than three years and for less than $8 billion.

Pemex CEO Octavio Romero Oropeza said the port of Dos Bocas is the optimal place to build a new refinery as the area gathers and exports over 1 million bbl/d of crude.

Building Dos Bocas "is the beginning of the recovery of the nation's security through the exercise of our national resource sovereignty, especially oil," the CEO said.

The refinery "will allow the creation of a fair, just and generous homeland," he added.

Daniel Rodriguez is a reporter with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.