Contractors ‘Abandon’ Dos Bocas construction

MEXICO CITY (Reforma) – The American company Kellogg Brown and Root (KBR), in charge of packages 4 and 6 of the Dos Bocas refinery, abandoned the second phase of the project because it exceeded the budget originally projected by the Ministry of Energy (Sener).

According to sources close to the site, the firm no longer continued in phase two because its costs exceeded the limits imposed by Sener. KBR was budgeting more than twice as much as projected by the Secretariat, with costs rising from 2.4 million to USD 4.7 million.

As explained by the sources, each of the contractors is developing the project in two phases: the first consists of engineering development. The second considers the purchase of equipment and construction. “Once phase one is completed, the cost proposal for phase two is prepared, and there must be a monetary conciliation.”

“When KBR bid for phase one, it knew that it would have to go through a conciliation process after this phase was completed, but this process went extremely far beyond the contracted amount. It was by mutual agreement to leave the project until phase one,” said the sources.

The Italian-Argentine company Techint, together with ICA-Fluor, are the firms that took over KBR’s work.

Package 4 includes works in the treatment plants of bitter water, wastewaters, sulfur recovery plants, hydrogen production, and gas treatment, while Package 6 considers service and integration works.

KBR’s Phase 1 contracts are valued at more than $156 million ($77.9 million in Package 4 and $78.9 million in Package 6).

The Dos Bocas refinery has been a highly criticized project since before its construction, due to its economic viability.

In January of last year, Grupo REFORMA published that the Mexican Petroleum Institute (IMP) made a technical evaluation. It stated that the refinery was technically and financially unviable and that even its total cost would be 14.74 billion dollars, exceeding the 8 billion dollars budgeted by the Government.

The project’s conditions were so aggressive that later, in May 2019, the bidding process for the work project manager was declared void, since none of the participants managed to meet Sener’s expectations.

Now, more than a year after the start of construction, the IMP is seeking a “second opinion” to certify the development of the work, its critical elements, and risk factors.

Sources close to the Sener assured that this new diagnosis occurs because of the need to have a third party, external to the Government, who “can qualify that the engineering is sufficiently mature to continue with the next stage.”

“It is a practice that all projects usually have according to best practices. It is not that we are questioning the development of the project. The engineering is practically finished”, said the source.

Rosanety Barrios, a specialist in the energy sector, explained that this diagnosis had to be made long before the project received its development resources. It is one of the Treasury requirements to free up resources.

The Dos Bocas refinery has a physical and financial advance of 13 percent, with a cut-off date of September 15th.