Study sank $1.3 bn refinery project with China: Costa Rica

Irreconcilable differences over a rejected feasibility study scuppered a $1.3 billion project with China to build an oil refinery, Costa Rica's state-run petroleum distribution group RECOPE said Wednesday.

"The best option in the public interest" was to "terminate the participation in SORESCO," a joint venture for the project, RECOPE's president, Sara Salazar, told a news conference.

Costa Rica's deputy foreign minister, Alejandro Solano, said however at the same news conference that he did not believe Chinese-Costa Rican relations would be affected.

RECOPE, which has a monopoly on importing and distributing fuel in Costa Rica, announced last week that it had canceled the refinery project with the China National Petroleum Corporation (CNPC).

The SORESCO venture was created seven years ago with the aim of building a new refinery on Costa Rica's Caribbean coast with a capacity to handle 60,000 barrels of oil a day.

But in 2013 Costa Rica's public auditing authority rejected a feasibility study carried out by a CNPC subsidiary, HQCEC, saying it violated a contract clause requiring the study to be conducted by an independent contractor.

RECOPE pushed state-owned CNPC to have a new study done, but the Chinese refused, asserting that the original one had been approved by Costa Rican and Chinese authorities, Salazar said.

The RECOPE chairwoman said Costa Rica was now looking to reach an amicable arrangement on the liquidation of the project, but did not rule out CNPC demanding compensation and mediation being required to sort that out.

On Monday, a Chinese foreign ministry spokesman in Beijing said China's government had "noticed" the reports on Costa Rica scrapping the venture.

"The Chinese side attaches importance to its firm relationship with Costa Rica," he said.

"With regards to problems emerging from cooperation, we hope that companies from the two sides will continue to increase communication, understand each other?s concerns and find an appropriate settlement."

Both state companies had created SORESCO with $100 million in capital to carry out the necessary studies and initial work. Around $60 million of that has been spent.

Salazar said RECOPE was not excluding the possibility of still having a new refinery built, maybe with the involvement of a different foreign company.