[dropcap]I[/dropcap]nexperienced contractors, lack of planning, delays, strikes and other unexpected factors plagued a modernization project at the Refinery of Cartagena (Reficar) from the start, according to project directors and Colombian government officials.
Those issues, among others, led to a budget overrun of more than $4 billion to refurbish Colombia’s largest oil refinery. The total project cost more than $8 billion, a nearly 100 percent increase over the original plan, and one of the country’s most expensive mega-projects.
On Wednesday, the presidents of Ecopetrol and Reficar, along with the Minister of Mines and Energy and the Minister of the Treasury held a press conference to explain why the project roughly doubled its cost over the nearly decade-long construction period.
The first problem, according to officials, was starting construction with only 21 percent of engineering plans in place.
European and U.S.-based contractors hired to execute the project also had little experience in building refineries and offered overly optimistic timelines and cost schedules, said government and Reficar representatives on Wednesday.
The original budget was established by a company that had never built a refinery, according to Minister of Mines and Energy Tomás González.
Substantial cost overruns and delays have been public knowledge since at least 2012, but at that point it was too late to do much more than minimize further damage, said Ecopetrol President Juan Carlos Echeverry.
“In 2012, we took corrective decisions,” explained Echeverry. “We were in the middle of the river and it would have been more expensive to swim backwards than forwards.”
Minister González agreed.
“It was indispensible to finish,” he said. “[Reficar] is indispensible for the energy security of the country.”
“Nonetheless, there has been much discussion of the time it took to finish the project and the costs of the project.”
It is hardly an ideal time for unexpected costs in the oil refining business. Oil prices globally are at a more than 10-year low. In Colombia, plummeting oil values have helped pushed the peso lower and lower against the dollar, affecting businesses and consumers of imported goods.
Nonetheless, president of Reficar Reyes Reinoso explained that the quality of Reficar’s infrastructure should be something of which Colombians can be proud. “Despite its costs, this will be a profitable project,” he pointed out.
Reinoso estimates that the refinery, which recently became operational, should be able to process as many as 58 million barrels of oil per year.
“This does not mean that Reficar is happy about what it cost to finish the project, nor that Reficar celebrates the time it took to finish the project,” he said.
In January, the National Comptroller General’s office released a nearly 200 page audit based on some eight years of investigations into the case. The report chronicles many of the problems outlined in Wednesday’s press conference.
After releasing the audit, the Comptroller solicited the help of the National Attorney General’s office in obtaining additional communications records, including corporate emails and other documents related to the case.
On Tuesday, the Attorney General announced that it would confiscate materials from Reficar offices in Bogotá and Cartagena.
During Wednesday’s press conference, Reficar representatives assured that corruption and scandal would not be tolerated.
