Pemex Refinery Delays: $17bn Project Faces Setbacks

Lilu Anderson
Photo: Finoracle.net

Pemex Refinery Still Not Ready for Commercial Production, Say Sources

The Olmeca facility, one of Mexico's flagship infrastructure projects, has been hit by multiple delays.

Repeated Setbacks

The refinery on Mexico’s southern coast has suffered multiple scheduling setbacks. Pemex’s Olmeca oil refinery is unlikely to produce commercial quantities of fuels by the end of this year, despite the project being a showpiece development for current Mexican President Andrés Manuel López Obrador.

State-Owned Petroleum Struggles

The newest facility for Petróleos Mexicanos (Pemex), the Mexican state-owned petroleum company, has already suffered a series of delays and a doubling of construction costs, as the country moves towards energy independence.

Challenges Ahead

According to Reuters, citing unnamed sources familiar with operations, it would now not be impossible for the refinery to meet previously stated targets, namely reaching full production capacity in the coming weeks.

Reuters stated that neither Pemex nor the president’s office responded to requests for comment.

The sources said several engineers were working on individual parts of the refinery, which still need to be fully linked and integrated. In fact, this last step was described as a months-long complex and agonizing process, according to one of the sources.

Optimistic Yet Realistic

Another source said that operationally “the refinery is fine so far, but the problem is the expectations that have been created.”

Even if all goes to plan, the first of two production lines would be ready between October and November, at the earliest. The cost of the refinery is now estimated at close to $17bn (308.18bn pesos).

Inauguration and Future Implications

President Obrador inaugurated the 340,000-barrel-per-day (bpd) refinery in July 2022, stating at the time that it was a crucial step towards Mexico’s energy independence. When fully operational, it will increase the country’s refining capacity by almost 20%.

Oil and Gas Production Stats

Mexico’s total oil and gas production was 1.9 million barrels of oil equivalent per day in 2023. The country remains the second-largest oil and gas producer in Latin America, although the hydrocarbons share of the economy has been decreasing as the country diversifies its export portfolio and struggles with the competitiveness of its crude petroleum exports.

Current Operations

In May 2024, Reuters reported that Pemex had started sending 16,300bpd of crude oil to the refinery in Obrador’s home state, Tabasco, which is less than 5% of its total capacity.

Obrador will be replaced by Claudia Sheinbaum in October after she was elected president in early June.

Future Collaborations

Pemex was also recently reportedly to be in talks with Mexican business investor Carlos Slim’s companies regarding the revival of the country’s first deep-water natural gas field, the Lakach field, which has been shelved twice previously.

Located 90km from the Gulf port of Veracruz, the field is estimated to hold 900 billion cubic feet of gas. Pemex is looking to develop the offshore field through a service contract model, where partners finance projects upfront.

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Lilu Anderson is a technology writer and analyst with over 12 years of experience in the tech industry. A graduate of Stanford University with a degree in Computer Science, Lilu specializes in emerging technologies, software development, and cybersecurity. Her work has been published in renowned tech publications such as Wired, TechCrunch, and Ars Technica. Lilu’s articles are known for their detailed research, clear articulation, and insightful analysis, making them valuable to readers seeking reliable and up-to-date information on technology trends. She actively stays abreast of the latest advancements and regularly participates in industry conferences and tech meetups. With a strong reputation for expertise, authoritativeness, and trustworthiness, Lilu Anderson continues to deliver high-quality content that helps readers understand and navigate the fast-paced world of technology.