Costa Rica mulls new oil refinery to combat rising fuel costs

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By LatAm Reports Editor

Costa Rica is considering the establishment of a new oil refinery in the Limón province, as announced by President Rodrigo Chaves. This initiative is drawing attention from various investors and is seen as a key step in creating job opportunities and reducing fuel costs in the country. Chaves highlighted this project as one of the significant undertakings for the Caribbean province.

Leading the charge for this initiative is Juan Manuel Quesada, the head of the Costa Rican Oil Refinery (Recope). He is currently engaged in discussions and negotiations regarding the refinery. President Chaves has been in talks with Quesada, urging the acceleration of certain legal processes while ensuring that public funds are not wasted.

The financing of the refinery project is expected to be borne by the investors, with the Costa Rican State abstaining from financial contributions. This decision comes in the wake of lessons learned from the unsuccessful Soresco project, a past venture that did not yield favorable outcomes.

President Chaves underlined the complexity and sophistication of this investment, acknowledging the necessity of environmental studies while reiterating the commitment to environmental protection. Recope, in response to the growing investor interest, has already called for detailed technical and financial studies for further evaluation, as confirmed by Quesada. He emphasized the need for a comprehensive analysis to assess the project’s feasibility thoroughly.

While there is evident interest, the approval for the project will only be granted if it is deemed beneficial for the country, ensuring advantages for all Costa Ricans. President Chaves has clarified that this new refinery proposal is distinctly different from the Soresco project, which began in 2007 as a joint venture between the governments of China and Costa Rica, involving the China National Petroleum Corporation (CNPC) and Recope. However, due to identified flaws and infeasibility, the agreement ended in international arbitration.

In 2019, the London Chamber of International Arbitration (LCIA) sanctioned the dissolution of the Soresco joint venture, mandating Recope and CNPC to undertake necessary measures for its liquidation. The arbitration, finalized on October 28, 2019, set the process costs at $880,000, with Recope bearing half of the expenses. This historical context sets a backdrop for the cautious approach being taken for the new refinery project in Limón.