The Ministry of Natural Resources has invited proposals for the design, finance and construction of a 30,000 barrel per-day oil refinery to be built in the vicinity of Crab Island, in Berbice, in which it will have no ownership or investment interest.
The move comes just over a week after President Irfaan Ali announced that the government would be looking at the construction of an oil refinery in an effort to become more energy secure. The President, again, spoke about the project when he delivered the feature address at the opening of the Berbice Expo and Trade Fair on Friday.
“In two months we will be receiving the submission of those who are interested in investing in this for a 30,000-barrel refinery to be established right here in Region Six,” he told the gathering at the expo.
He then touted the opportunities which the refinery will create for transport and logistics, the services industry, the construction industry, and the rental industry, saying that it will be “enormous and will bring tremendous benefits to the people of this region.”
The Request for Proposals (RFP), published in yesterday’s daily newspapers, states that the proposed project is in response to numerous expressions of interest that the government has received. As a result, the government is inviting interested parties to submit proposals for the design, finance and construction of the refinery.
The refinery will be located on lands provided by the government at the mouth of the Berbice River in the vicinity of ‘Crab Island’.
Canadian company CGX Energy Inc has proposed to construct a deep-water port facility adjacent to Crab Island. The deep water port proposed by CGX is to be constructed aback of Seawell Village, Corentyne, Berbice and the civil works are being carried out by the company’s subsidiary, Grand Canal Industrial Estates Inc (CGIE). The deep water port facility is estimated to cost a total of US$80 million.
CGIE had acquired a lease from government for 54.96 acres of the Berbice Riverfront lands on August 10th, 2012 for a period of 50 years.
The RFP informed potential investors that the government is intent on starting construction in the first half of 2023, with a completion date no later than two years after the commencement of construction.
The government said that it will be providing the successful party with “adequate land at the mouth of the Berbice River for the venture (estimated to be 30 acres); generous fiscal incentives for the project including a 10-year tax holiday; supply of feedstock (oil) from the GoG share of profit oil at market prices; and access to the domestic market for sale of refined products (if desired).”
The RFP made it clear that the project is to be wholly financed and owned by the private sector, adding that government will not have any ownership or investment interest.
The interested party is expected to show their capability and credibility to execute a project of this nature. They are required to submit a detailed track record of similar projects completed, showing role played in design, financing, and construction, date of project start, date of completion, capacity (b/d), and total budget; evidence of financial ability, including last 3 years of audited Financial Statements, and details/evidence of financing for this project from own resources or third-party resources.
Additionally, the government is requesting that interested parties submit clear written agreements between their partners listing a breakdown of proposed shareholding, lead investors/shareholders and if a consortium, evidence of a legally binding consortium agreement for this project.
The RFP informs that a site plan for the land required should be submitted. The plan should include utilization and layout of facilities, including storage and connections to sea or river to allow loading/offloading of crude and finished products. The plan should also show connections to existing road infrastructure for the movement of tankers and other vehicles, to and from the site.
Additional requirements include the submission of a summarized and detailed project schedule along with clear descriptions of all key infrastructure works that will be undertaken by the project, including marine/river infrastructure and on-shore site development. A timetable including key milestones for financial close and commercial operations and commissioning should also form part of the proposal.
Project costs showing a breakdown of a mix of foreign and local costs along with a comprehensive business plan are also required. The business plan should show financing projections over a 20-year period from the start of operations and a summary market study showing the planned distribution of the refined products. The business Plan should clearly show the separation of fixed costs and variable costs and detailed allocation of expected margin per barrel of refined product – inbound logistics from FPSO, operating costs, outbound logistics and capital cost recovery.
Parties are asked to confirm if a Special Purpose Company (SPC) will be created in Guyana as well as show the key contracts of the relevant parties. They are also required to provide a list of all permits, licenses and permissions required by law along with the timeframe for the start and completion of these processes.
Additionally, a list of draft legal agreements, proposed capital structure for financing and details of proposed local content, including sub-contractors, and % of project costs that will be locally sourced will be required.
Government said that the response to the RFP will be used to determine a capable party to execute the project within the required timeframe.
All interested persons should register with the Ministry of Natural Resources. Questions or clarifications should be received as early as possible but no later than ten working days before the closing deadline. Responses to questions will be issued only to registered parties.
A virtual workshop will be held with registered parties no later than 3 weeks prior to the Closing Deadline. Interested Parties shall bear all costs associated with the preparation and submission of their response to this Request for Proposals (RFP), the government said.
Responses to the RFP must be delivered in hard copy (2 original and 1 copy) and soft copy (2 flash drives) not later than 9 am on Tuesday, December 13, 2022, into the Tender Box at the National Procurement and Tender Administration Board (NPTAB).
Last December, the United Kingdom-based Argus media had reported Minister of Natural Resources Vickram Bharrat as saying that Guyana was considering more than 10 proposals for oil refineries but that government was cautious.
The media entity had noted that the prospect of a refinery had been raised with the president when he had met with Mexican investors in December of last year.
Then in May of this year, Yahoo Finance reported Bharrat again speaking on the country’s consideration of proposals saying that government was “seriously considering” it, especially as fuel prices worldwide had risen following the war in Ukraine.
Before the COVID-19 pandemic and Russia’s war on Ukraine, Guyana had been warned by experts that bringing a refinery here would not be the best of options, given the environmental implications.
Chatham House fellow and oil consultant, Valerie Marcel, had back then said that Guyana’s green energy transformation could be realised if it doesn’t buckle to pressure for downstream investments in oil here and the country should instead focus on diversification.
