Planned Mexico refinery may face referendum

A new refinery project promised by Mexican president-elect Andres Manuel Lopez Obrador is likely to face a referendum, making an already challenging project even more difficult.

No polls have been released on public support for the proposed 300,000 b/d refinery in Lopez Obrador's home-state Tabasco, nor have the details of the proposed referendum.

But the idea of a public vote to decide whether or not to build a new refinery was brought by opposition party Partido de la Revolucion Institucional (PRI), suggesting many think the results might not be as favorable as Lopez Obrador and his party MORENA would hope.

"Polling citizens is of major importance as the refinery is a construction project with national impact," PRI's written petition for consult on the refinery says. "The project can affect our country's financial balance as well as the development of the nation."

PRI argues that even if construction helps with job creation and Tabasco's local economy, a refinery can also affect adjoining communities with water supply disruptions, pollution and security issues.

The ownership of the land where the project is proposed in Dos Bocas, Tabasco is unclear, meaning challenges with land rights are likely, PRI said. Consulting firms such as KPMG and PWC have also warned that the project's location may lead to an increased wave of fuel theft in the area.

PRI's petition has an another motive: determining if money should be allocated for the project in Mexico's 2019 budget.

"Where are the feasibility, environmental, and soil analysis studies required for this type of infrastructure?" PRI said in its petition. "Without this information no executive project can be outlined, and therefore no resources can be allocated, as construction, environmental and fiscal responsibility laws would be breached."

AMLO, as Lopez Obrador is widely known, recently conducted an informal national poll to determine the fate of a new airport under construction in Mexico City. The widely expected outcome led to cancellation of the project. PRI's request is for a process that could be somewhat similar.

The proposal to build a refinery is largely mirrored on Reliance Industries' 580,000 b/d Jamnagar 2 refinery in Gujarat, India, which was built with an $8bn budget in three years. But the Indian project was vastly different from what AMLO is proposing, having been an expansion of an existing refinery with access to infrastructure — not a greenfield project.

The incoming administration has argued the new refinery is needed to increase national fuel production and reduce Mexican dependence on imported gasoline. From January through August about 77pc of the Mexico's 799,000 b/d of fuel demand was met by imports. Imports meet 73pc of Mexico's diesel demand and 61pc of jet fuel demand.