The Government of Guyana hired Director of Advisory Services at United States-based Hartree Partners, Pedro Haas, to determine the feasibility of setting up of an oil refinery in Guyana.
Delivering his findings to a packed Auditorium at the Marian Academy on Wednesday evening (May 17, 2017), Mr. Haas outlined that building a refinery here would be a massive investment far exceeding the local demand of 13,000 and 14,000 barrels of oil per day. He added too, that such an investment is risky.
However, several stakeholders still believe that it is possible. In this regard, questions were raised about the potential spin-off benefits from such an operation and the probability of private investment.
Mr. Haas in response noted that private investment should not be shunned. “If they are taking the risk, it is their risk. If it turns out good, it is their risk,” he said, adding that “that’s what investors do, they take risks and transform it into profits.” On the other hand, he says a private investor may require subsidised cost and “that will be a problem.”
According to the studies conducted, the cost of setting up an oil refinery in Guyana can run up to US$5B including the cost of energy generation and labour.
He was grilled on the prospect of building a smaller facility which will cost less, but Mr. Haas noted that the smaller refineries are also expensive. “The economics are negative so you never get payback,” he highlighted.
He told the gathering that several options were looked at, which includes selling of Guyana’s crude and importing supplies, bartering crude for oil products and acquiring stocks in refining companies among others.
The question was raised about the potential lack of transparency if Guyana’s crude is sold, to which the Advisor said, “I think what’s important is to have a technical professional relationship with companies working in Guyana.” He noted that the Ministry of Finance has to build a list of credible persons “who have a knowledge of the economics and an understanding of how these markets work,” adding that these disputes happen in every country of the world and the “key to be prepared for that debate and have the knowledge to have that debate.”
Delivering closing remarks, Minister of Natural Resources assured that a decision will be taken after further consideration. He told those gathered that “certainly Government has not made any decision…much of the decision-making will be driven by political imperatives and hopefully the economic imperatives will not be lost as we make those decisions.”
Exxon Mobil is expected to begin production in 2020 and Trinidad and Tobago has since expressed an interest in refining Guyana’s oil.