KBR invited to bid on Mexico’s refinery
Houston company is one of only four asked to try for nation’s multimillion-dollar project
Houston engineering and construction company KBR is among the companies invited to bid on a multibillion-dollar project to build Mexico’s first new refinery in more than 40 years.
The refinery, estimated by the Mexican government to cost $8 billion, would process domestically produced crude oil to make gasoline and diesel at a time when Mexico is importing 80 percent of its fuel from the United States and other nations. Located on nearly 1,400 acres of coastal land owned the federal government in the state of Tabasco, the new Dos Bocas Refinery would process 340,000 barrels of crude oil per day to make gasoline and diesel to be sold at gas stations across Mexico.
“This project is the size and scope that our country demands of us,” said Mexican Secretary of Energy Rocio Nahle at a press conference in the state of Hidalgo. “It is of the dimensions that our people need. It is a challenge facing us as Mexicans but because we are capable, we are going to retake the role that belongs to us.”
Looking to accelerate the timeline for construction, Nahle said the Mexican government is restricting participation in the bidding process to four bidders, which include KBR, TechnipFMC, which has headquarters in London, Paris and Houston, and two consortia. One consortium comprises Bechtel of Reston, Va., and an Argentinian firm, Techint. The other includes the Australian firm WorleyParsons and Dallas engineering firm Jacobs.
Shifting policies
“The companies were chosen because of their technical capability, financial capability, quality, prior records of transparency and a code of ethics with a proven track record of responsibility,” Nahle said.
Officials from KBR and Jacobs declined to comment. Officials with Bechtel, Techint, WorleyParsons and Technip could not be reached for comment.
The refinery, which would be owned and operated by Mexico’s national oil company, Petroleos Mexicanos, or Pemex, is the centerpiece of the energy policy adopted by Mexico’s new president, Andres Manuel LopezObrador, and a potential blow to U.S. refiners that want to expand sales in Mexico as a result of the market reforms of LopezObrador’s predecessor, Enrique Peña-Nieto. Those reforms ended the 75-yearold Pemex monopoly and opened energy markets to foreign investment and competition.
Duncan Wood, director of the Mexico Institute at the Wilson Center, a Washington think tank, said the refinery announcement signals backtracking on energy reforms that were passed as constitutional amendments under PeñaNieto. The refinery announcement, he noted, was made on the 81st anniversary of Oil Expropriation Day, when Mexico nationalized its oil and gas industry in 1938.
Lopez Obrador also has canceled auctions of onshore oil blocks and electricity projects opened by the previous administration. For the time being, Wood said, demand will exceed Mexico’s refining capacity even as refineries are built and upgraded.
“There will be a healthy business for U.S. refineries in Mexico for at least another six years,” Wood said. “And even after then, Mexico will still have to import refined products.
Budget buster?
Pemex owns and operates six refineries that were designed to process a combined 1.3 million barrels of crude oil per day, but were running at roughly 40 percent of their capacity in January, figures from the state oil company show.
To make up for that shortfall, Mexico imported nearly 14.3 million barrels of crude oil and refined products from the United States in December, according to the U.S. Department of Energy.
With a construction permit already approved, studies and design work for Dos Bocas have been completed or fast-tracked, which should allow the winning bidder to complete the project within the three-year deadline. Bidders will have to use 50 percent domestically sourced materials in building the refinery, which Nahle said is expected to create 23,000 direct jobs and 100,000 indirect jobs during construction
Wood, however, said the Dos Bocas project is unlikely to stay within the $8 billion budget. Based on the technical aspects, Wood said, it’s more likely to cost about $12 billion.
“You can build a new refinery in the $8 billion range, just not at Dos Bocas — certainly not at that scale or capacity,” Wood said. “Maybe you can build one in a different location, or a smaller refinery.”