In light of recent revised estimates of recoverable oil reserves offshore Guyana by ExxonMobil, it is time to revisit the feasibility of an oil refinery. The Government of Guyana had contracted an international consultant to conduct a feasibility study of an oil refinery in Guyana. That presentation concluded that an oil refinery (a conventional refinery) would not be feasible in Guyana against the backdrop of the capital investment it would require, which was estimated at some US$5 billion.
Indeed, Guyana cannot afford such an investment, even if the capital were to be mobilised through a public/private partnership; because US$5 billion is greater than Guyana’s GDP, which is merely close to US$4 billion, and real GDP is about US$2 billion.
However, there are refineries that are far less costly to build, which are known as “modular refineries”. These refineries are usually capable of producing between 5,000 and 30,000 barrels of crude per day. These types of refineries have also experienced a trend in growing demand, largely driven by government initiatives in countries such as Nigeria and Indonesia for example, to add local refining capacity to offset continued growth of importing finished products for growing consumer demand (UOP, 2017).
The advantages of the modular refineries include: lower investment costs; being sized for lower local demand; modular fabrication offsite for higher quality, shorter schedule; and possibility for future relocation. The disadvantage in comparison to the traditional larger refineries is that traditional refineries have improved economies of scale, can produce a wider variety of refined products, can be integrated into petrochemical operations, and offer more flexibility (UOP, 2017).
In order to determine the viability of a modular refinery with a production capacity of 30,000 bpd, it is prudent to first establish what is the current demand or consumption of refined crude oil products, particularly fuel. To do so, data is readily available on the Guyana Energy Agency website, as illustrated in the table below:
Given the above data for 2014, total imports of refined crude products, inclusive of C.I.F (cost, insurance and freight) values, amounted to US$561.6 million; and in terms of quantity, is close to five million barrels. So we can safely say Guyana’s average annual consumption is about five million barrels of crude annually, which works out to 13,700 barrels of crude per day.
Therefore, a modular refinery with production capacity of 30,000 barrels per day would be able to satisfy Guyana’s local consumption needs of refined crude products, which would also save a hefty import bill of in excess of US$500 million annually, and the excess production can easily be exported to other CARICOM countries.
In fact, this is more reason why Guyana should start considering a modular refinery, given that Petrotrin in Trinidad & Tobago was recently closed down, which thus prompted CARICOM countries to have to secure new suppliers of fuel. This is therefore a strategic opportunity that Guyana, becoming the next oil producing country in the region, should position itself to advance these avenues and maximise profit.