Government has not ruled out having an oil refinery here but does not see it feasible at this time as consistent crude supply, shallow waters and storage are issues that first needs addressing, Minister of Natural Resources Vickram Bharrat has said.
“We will have to do a bit more assessment and allow the companies to do their assessment as well. But it’s something that the government is still inclined to have as an investment in Guyana along with storage,” Bharrat told a press conference on Wednesday.
“…It makes no sense having a refinery in Guyana and we cannot supply the crude to it. It makes no sense because you simply have to import crude. That is defeating the entire purpose,” he reasoned.
In October 2022, government issued a call for Request for Proposals (RFP) 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 RFP stated that the proposed project was in response to numerous expressions of interest the government had received. As a result, it was inviting interested parties to submit proposals for the design, finance and construction of the refinery on land provided by the government at the mouth of the Berbice River in the vicinity of Crab Island.
In the RPF, the government had said it would provide 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 was to be wholly financed and owned by the private sector and the government would not have any ownership or investment interest.
In June last year, Vice President Bharrat Jagdeo had said that there were 11 proposals, which were narrowed down to four. Those four, he said, “met all the parameters we requested in the RFP. That now needs to move to the next stage, which is to rank these, and then start the discussions with the number one ranked firm and see if we can reach an agreement.”
But last August, during an official visit to the Dominican Republic (DR), President Irfaan Ali clinched several MoUs with his counterpart President Luis Abinader on an oil refinery and petrochemical plant among other areas.
According to the DR’s number one news source, Listin Diario, Abinader announced plans to construct an oil refinery and a petrochemical plant that will produce urea for agricultural production, with the DR having a stake of over 51% in both projects.
This year, during his budget speech in January, Minister of Finance Dr Ashni Singh said that the final ranking of bidders for a 30,000-barrel oil refinery in Berbice would have been completed in the first quarter of this year.
However, Bharrat said that the government doesn’t see a refinery setting up here at this time as feasible since key to having a functional plant was a consistent supply of crude and that would require oil tankers delivering it, a task not possible given the shallow waters here.
“… If you’re going to bring in a vessel or a tanker with a million barrels of oil, then you have to get the draught or you have to build a platform 10 (or) 15 kilometres out and pipe it in,” he said.
And while that may not be possible now given the amount of oil being produced, Bharrat is confident that when this country’s oil production vessels increase to about five or six, there would be no issue in supplying 100,000 barrels per day to a refinery.
Economist Dr Clive Thomas last year posited that the case for an oil refinery here has not been made. In his ‘Guyana and the Wider World’ column last February, Dr Thomas, who has focused extensively on the oil and gas industry, said the basis for the consideration here for a refinery has not improved since 2017 when he had first addressed the matter in detail following the publication of a report by the Pedro Haas consultancy.
“While modular refinery technology has yielded productivity gains in capability and complexity and incomes and demand for refined products have grown in Guyana, the scale of proposed operation at 30,000 is less than one-third of that in the Haas study-100,000 bbl/d,” he said.
Internationally, Thomas said, many prevailing economic trends work against the construction of new oil refineries at this time.
“Perhaps the most pressing secular and structural trend is the global climate transition underway from carbon emitting fuels. Recall the vast majority of nations, indeed the United Nations itself, is spearheading the switch to renewables. A small emerging oil producer cannot resist these pressures. Even a powerful USA is being pressured to shut down refining capacity in 2022 even as a shortage of such capacity is evident.
“Global macro-economic trends reinforce the secular economic trend indicated above. Covid-19 and post pandemic effects on supply chains, government spending, price, and interest rates policy responses, have been complicated by geo-political tensions, the war in Ukraine along with big power trade, technology and investment stresses. All these work against capital intensive investment in a carbon-emitting extractive sector,” he argued in his column.
He noted that the authorities have at the highest levels propounded the view that national security concerns are playing a key role in their approach to a local oil refinery. This, he said, has been sparked by skyrocketing crude prices amid geopolitical turmoil and the Russia/ Ukraine war. He said that Vice President Jagdeo was cited in the media on the national security considerations as claiming it was “to ensure Guyana does not run out of fuel”.
He pointed out that the fortunes of crude oil refinery construction in the Caribbean, whether for exportation as a deep-water port or for domestic import substitution, make for disappointing reading.
“Refineries have closed as loss-making promising to re-open at dates long passed. For Guyanese the geographic proximity of Trinidad and Tobago, reinforced by travel, migration, trade and cultural links make for shared experiences. Emerging oil and gas in Guyana must seek to learn from its neighbour’s mistakes. While we celebrated development in the opening of Petrotrin, we must also learn the lesson of its losses, bankruptcy and closure in 2018,” Thomas warned.
