Vice President Bharrat Jagdeo has made it clear that the Government will not be selling crude to any refinery with a capacity above the 30,000 barrels per day (bpd), as the Government is currently seeking proposals from interested companies.
During a press briefing on Thursday, Jagdeo explained that the Government does not want the carbon footprint a large refinery would leave. Earlier this year, there were a number of companies that had expressed an interest in building large refineries in Guyana. Jagdeo noted that this is why the Request for Proposals (RFP) that has been issued by the Government, specifies that the proposals must be for a 30,000-bpd refinery.
“We need for national security, a small refinery in the country. So, we’re not looking to become the refinery capital of the Region. So how do we trigger this? We don’t want to own it in Government, but how do we get all these bidders to work together? We’re only selling 30,000 barrels of crude per day to one, the bidder most serious about building the refinery.”
Jagdeo noted that in the Request for Proposals, the Government put out that they would provide the land, and tax concessions and would sell the oil needed for the refinery to operate. He explained that while the company that eventually wins the bid will not be restricted to selling fuel to the Government, in times of crisis the State can exercise its powers to restrict fuel export and make the company sell to them for domestic consumption.
“So, this is for national security purposes, to have energy security at home so we don’t run out of gas or diesel or anything like that here. We’re pursuing this refinery. But not with Government funds. And through an open process,” Jagdeo explained.
“I saw one person say they want to build four refineries. Who is that? I don’t know who would want to build four refineries… it doesn’t make sense. That’s all we’re supporting, a 30,000-barrel-a-day refinery for Guyana. The others, we’re not selling any crude to them.”
Successive Governments have been cautious on the matter of building a refinery in Guyana that is State-owned, resulting in the only takers for this initiative coming from the private sector. The former A Partnership for National Unity/Alliance For Change (APNU/AFC) Government had previously hired a consultant, Pedro Haas, to carry out a feasibility study into constructing an oil refinery.
The results of the study did not favour building a refinery, particularly one with a capacity to produce over 100,000 barrels per day. In his study, Haas looked at the cost of building an oil refinery with a capacity of producing more than 100,000 barrels of oil per day. The study had come up with a US$5 billion price tag in order to construct the refinery in Guyana.
The expert also suggested that as an alternative to the establishment of an oil refinery, the Government could pursue maximising income from commercialising crude oil. Another suggestion was that the Government swap or toll crude oil for products on the global market or create joint ventures with offshore refineries, as well as acquire stock in refining companies.
However, the study was done at a time when oil giant ExxonMobil was the only operator in Guyana’s waters to find oil in commercial quantities. Members of the private sector have previously urged that the construction of a refinery be re-explored when more operators find oil.
Back in August, Jagdeo had hinted that while the Government had received at least eight or nine proposals for big refineries to be set up here, there is a need for at least one small refinery in the country to process the crude for local consumption in order to ensure the country’s energy security in the future.
According to the RFP that was issued, construction on the refinery is expected to begin by the first half of 2023, with the project expected to be completed within two years. The refinery will be located near the Berbice river. The proposals are due next month.