Plans to build a new $8 billion refinery in Mexico got a boost from the Chinese government.
During a Monday morning event in Mexico City, China's ambassador to Mexico Zhu Qingqiao announced that the Bank of China and the Industrial and Commercial Bank of China, or IDBC, would invest $600 million into the Dos Bocas Refinery.
Already under construction in the southern coastal state of Tabasco, the refinery project is designed to process 340,000 barrels of heavy crude oil per day into gasoline, diesel and other products.
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The refinery project is considered by Mexico's President Andres Manuel Lopez-Obrador as the crown jewel of his administration's energy policy, which seeks to boost domestic production of crude oil and end dependence on imported refined products, which mostly come from Texas or Louisiana.
China's investment also comes at a time when Mexico's state-run oil company Petroleos Mexicanos, or Pemex, has endured billions of dollars of losses over the past years, ruining its credit ratings and ability to attract foreign capital.
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Tony Payan, an expert on Mexico's energy policy with Rice University's Baker Institute, said many doubt the refinery project's chances of success. Based on the construction other refineries around the world, many believe that completing the Dos Bocas project by its stated goal of 2023 and for $8 billlion is unrealistic.
It remains unclear what will happen if the refinery defaults on the $600 million loan from China but Payan said the investment comes a time when the relationship between the United States and Mexico has been set adrift.
"This is not a financial opportunity for China, this is a political opportunity," Payan said.
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