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Costa Rica Halts $1.3 Billion China-Funded Refinery Plan

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June 21 (Bloomberg) -- Costa Rica’s government halted a $1.3 billion refinery modernization largely funded by the Chinese government due to a contractual violation, paralyzing the Central American country’s biggest investment project.

A feasibility study on the refinery modernization was conducted by Chinese company HQCEC, which has ties to China National Petroleum Corp., or CNPC, the comptroller general’s office said yesterday in a statement on its website. The terms of the contract specified that the study couldn’t be carried out by a company associated with CNPC, which is partnering with the Costa Rican state oil company, or Recope, on the project, the comptroller general’s office said. Calls and e-mails to CNPC spokesmen in Beijing weren’t immediately returned.

“Due to an investigation, the comptroller general’s office determined the breach of a clause 5.02, signed by Recope and CNPCI International Ltd,” according to the statement. “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 Chinese President Xi Jinping and President Laura Chinchilla during a visit by Xi to the country earlier this month. The modernization was to be primarily funded by a $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 modernization, which targeted an increase in fuel production to 65,000 barrels per day from the current rate of 18,000, will be prepared within six months, Recope said in a statement.

To contact the reporter on this story: Adam Williams in San Jose, Costa Rica at awilliams111@bloomberg.net

To contact the editors responsible for this story: Bill Faries at wfaries@bloomberg.net; Andre Soliani at asoliani@bloomberg.net

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