British expert discourages establishment of local oil refinery
DPI, GUYANA, Friday, March 23, 2018
The Government of Guyana is being advised not to invest in a local oil refinery owing to the fact that refineries attract large amounts of capital expenditure.
British Professor of Economics, Sir Paul Collier told the local media on Wednesday that “the whole oil industry is going to tether out in 2040. You might be left with a great lump of technology off your shores which has no use.”
According to Sir Paul, the margin on returns for refining oil is very small. He also advised that the Government avoids subsidising gas because “that way the society ends up drinking what it should be accumulating”.
He said the Government will learn as the oil and gas industry develops, what are the best investments, taking into account the unpredictability of the market.
Minister of State, Joseph Harmon had stated that the government will take on board all recommendations before making any decision on the establishment of an oil refinery.
“We have to take on board all of the advice that is given and then at the appropriate time the Minister (of Natural Resources) will bring a memorandum to Cabinet upon which we will cogitate and make a decision that is in the best interest of the people of Guyana,” Minister Harmon said.
In May 2017, Pedro Haas, Director of Advisory Services at Hartree Partners, who was tasked with carrying out a feasibility study for an oil refinery in Guyana, revealed that the cost to construct an oil refinery would be US$5 billion.
The feasibility study found that it would be too costly for the government to invest in an oil refinery.
The consultant, who was secured through the New Petroleum Producers Group by Chatham House, said that the final results of the study show that Guyana would be “destroying over half the value of your investment the day you commission your refinery”.
Further, Sir Paul suggested that Government examines the idea of establishing a national oil company, not to conduct off-shore drilling, but to operate as a minority equity partner to build expertise in the operation.
This will better position the Government in decision-making, policies and future engagements with other oil companies seeking to invest in the country’s oil and gas industry.
The British expert re-emphasised the need to have a national conversation on these and other issues to chart a common course forward.
By: Stacy Carmichael