Not So Fast: Oil Expert Says New Refinery May Not Be Wise Move for Guyana

GEORGETOWN, Guyana, Thursday May 18, 2017 – An international oil expert has advised the Guyana government to think twice about building a new 100,000 barrel-per-day oil refinery there, warning that it could result in substantial financial losses.

“I don’t know that [building] a new refinery, with all the ancillary facilities that you need, will be a profitable event,” Director of Advisory Services at the United States-based Hartree Partners, Pedro Haas said at a public consultation organized by the Ministry of Natural Resources yesterday.

Against the backdrop of an estimated daily demand of between 3,000 and 14,000 barrels per day, Hass, who was hired by the Government to explore the feasibility of the project, estimated it would cost US$5 billion, including the cost of the on-site infrastructure such as power generation, hydrogen, water treatment, tanks, a steam co-generation plant, docking and other facilities.

He calculated that the cost of constructing a new refinery would be at US$25,000 per barrel.

The international oil expert, who has worked in the private sector and government, also took into consideration the cost of oil at US$46.50 per barrel – which he pointed out would vary on a daily basis – as well as the fact that the United States has been exporting a lot of cheaper shale oil and liquefied natural gas.

However, Hass proposed a number of alternatives to the construction of a refinery in Guyana that included selling all of the country’s crude and in turn importing supplies, swapping crude for oil products, or reaching an agreement with a refinery to have a “certain slate of products” returned at an agreed place.

While he poured cold water on the idea of the state-built refinery, he urged the Government to favourably consider any offer by the private sector to construct such a facility.

In response, Minister of Natural Resources Raphael Trotman told the consultation that the Government would have to consider the social benefits of a refinery.

He stressed that one of the key considerations would be the creation of jobs.

“There are refineries in other parts of the world which may not be turning an economic profit but they provide other benefits,” he said.

Raphael said Cabinet would have to study the recommendations.

ExxonMobil intends to extract 100,000 barrels per day from its Liza field offshore Guyana when production begins in 2020.

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