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Cablegate: Indian Refiner Only Bidder for Mesoamerican

VZCZCXYZ0010
RR RUEHWEB

DE RUEHME #6461/01 3181731
ZNR UUUUU ZZH
R 141731Z NOV 06
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 4192
INFO RUEHBE/AMEMBASSY BELIZE 1396
RUEHBO/AMEMBASSY BOGOTA 3710
RUEHCV/AMEMBASSY CARACAS 1230
RUEHGT/AMEMBASSY GUATEMALA 3499
RUEHMU/AMEMBASSY MANAGUA 0917
RUEHNE/AMEMBASSY NEW DELHI 0238
RUEHZP/AMEMBASSY PANAMA 2142
RUEHSJ/AMEMBASSY SAN JOSE 1573
RUEHSN/AMEMBASSY SAN SALVADOR 2370
RUEHDG/AMEMBASSY SANTO DOMINGO 0706
RUEHTG/AMEMBASSY TEGUCIGALPA 1580
RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHDC

UNCLAS MEXICO 006461

SIPDIS

SENSITIVE
SIPDIS

STATE FOR WHA/MEX, WHA/EPSC, EB/ESC
DOE FOR INTERNATIONAL AFFAIRS K DEUTSCH, M PRINIOTAKIS AND
S LADISLAW
DOC FOR ITA/TD/ENERGY DIVISION

E.O. 12958: N/A
TAGS: ENRG EPET ECON MX
SUBJECT: INDIAN REFINER ONLY BIDDER FOR MESOAMERICAN
REFINERY

REF: MEXICO 4494 AND PREVIOUS

Sensitive but Unclassified, entire text.

1. (SBU) Summary. GOM officials responsible for the
Mesoamerican Energy Integration Project (PIEM) have selected
only Reliance Refining in the first phase of bidding for
construction and operation of a Central American refinery.
The Indian firm will now have until July 2007 to prepare a
proposal for the project. Meanwhile GOM sources continue to
dismiss concerns about the commitment of the Calderon
administration as well as Mexico's ability to follow through
on its commitment to supply the facility with heavy crude.
End Summary.

2. (SBU) India's Reliance Refining was the only qualified
company that expressed interest in operating the proposed
Central American refinery that is the centerpiece of the
PIEM, according to Pemex Marketing (PMI) Commercial Director
Bernardo de la Garza. November 12 was the deadline for
international firms to express interest in construction an
operation of a refinery in Central America (reftels). As the
only bidder to pass through the approval phase, Reliance will
now be able to purchase all of the relevant information on
the project developed by consultants for the Interamerican
Development Bank (IDB). The company will also be given "full
access" to negotiate with PIEM member governments --
including the governments with preferred sites, Panama and
Guatemala -- for the most favorable terms for locating the
refinery. The company will have until July 2007 to present
all PIEM member governments with a successful proposal for
building and operating the refinery.

3. (SBU) De la Garza said the GOM was disappointed, but not
surprised that the U.S. majors they had sought to build and
operate the facility opted not to go any further in the
process. ExxonMobil and Chevron told the GOM the refinery
project did not meet their return threshold. PMI, acting on
behalf of the GOM and the PIEM participants, also
disqualified a number of construction, oilfield service and
project management firms from the bidding process --
including Mexican Billionaire Carlos Slim's Ideal -- because
they did not meet the minimum standards for bidders. De la
Garza explained that in order to move on to the second
bidding phase the firm had to: (1) have refining experience,
(2) have experience processing heavy crude, (3) show they
have the "economic capacity to build a refinery," (4) have
demonstrated significant project management experience, and
(5) have previously commercialized petroleum products.

4. (SBU) Reliance was the only firm that met the five
criteria. De La Garza added that PMI had sold crude to
Reliance and found them to be a capable operator. Now, with
only one bidder, the process would become more of a
negotiation than a traditional bid. PMI, as manager of the
selection, would develop what they believe to be a "fair
offer" on the part of the refiner, and seal it awaiting the
Reliance proposal. The GOM would brief PIEM member states at
a meeting November 15-16 on how the process would unfold from
here.

5. (SBU) While disappointed that no U.S. major bid on the
refinery, the GOM is prepared to move forward with the
proposal. Reliance's experience refining heavy crude at
their Jamnagar refinery could be applied to the region, and
de la Garza believed that the investment, if successful,
would give the company an opportunity to expand marketing
into North America. Meanwhile, the GOM continues to watch
Oxy's plans to build a topping unit in Panama, as well as the
PDVSA Memorandum of Understanding with Panama on construction
of a refinery.


6. (SBU) Comment: Despite the upcoming change of government
as well as continued questions about Mexico's ability to
provide the heavy crude feedstock given recent double digit
annual production declines from Mexico's largest heavy oil
field, de la Garza at Pemex and his counterparts in the SRE
and in the Energy Secretariat responsible for the PIEM
continue to vigorously support the Mesoamerican Refinery.
End comment.


Visit Mexico City's Classified Web Site at
http://www.state.sgov.gov/p/wha/mexicocity
GARZA

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