Costa Rica halts China-funded refinery project

PUBLISHED : Friday, 21 June, 2013, 10:24am
UPDATED : Saturday, 22 June, 2013, 2:58am

Costa Rica's government halted a US$1.3 billion refinery modernisation largely funded by the Chinese government because of a contractual violation, paralysing the Central American country's biggest investment project.

A feasibility study on the refinery modernisation was conducted by Chinese company HQCEC, which has ties to China National Petroleum Corp, the comptroller general's office said in a statement on its website.

The terms of the contract specified that the study could not be carried out by a company associated with CNPC, which is partnering Costa Rican state oil company Recope in the project, the comptroller general's office said. Calls and e-mails to CNPC spokesmen in Beijing were not returned.

"Due to an investigation, the comptroller general's office determined the breach of a clause 5.02, signed by Recope and CNPCI International," the statement said. "The company that conducted the feasibility study has a relationship with the Chinese state oil company, which is prohibited and a breach of contract."

The project, in the city of Limon on the Caribbean coast, was the subject of talks between President Xi Jinping and President Laura Chinchilla during Xi's visit to the country earlier this month.

The modernisation was to be primarily funded by a US$900 million loan from China Development Bank Corp.

Recope president Jorge Villalobos Clare resigned following the decision, newspaper La Nacion reported.

A revised plan for the refinery's modernisation, which targeted an increase in fuel production to 65,000 barrels per day from the current rate of 18,000, would be prepared within six months, Recope said in a statement.