A few months ago, or thereabouts, commentators had been calling for a revisit of the feasibility of an oil refinery in Guyana amidst the vast oil deposits offshore, wherein Guyana now has in excess of six billion [declared] barrels of recoverable oil reserves. Against this background, the idea of an oil refinery might well be feasible, but the type and model of refinery would be an underlying factor.
An international consultant was contracted by the Government of Guyana to conduct a feasibility study in regard to an oil refinery. It was unfortunate, however, that the consultant only considered a conventional oil refinery, which Guyana most obviously cannot afford. 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.
That notwithstanding, there are refineries known as “modular refineries” that are far less costly to build. These refineries are usually capable of producing between 5,000 and 30,000 barrels of crude per day. These types of refinery 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).
“In the oil refining business, the cost of inputs (crude oil) and the price of outputs (refined products) are both highly volatile, influenced by global, regional, and local supply and demand changes. Refineries must therefore find the “sweet spot” against a backdrop of changing environmental regulations, changing demand patterns, and increased global competition among refineries in order to be profitable”. (Canadian Fuels Association, 2013).
The advantages of the modular refineries include: lower investment costs; 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 these (traditional refineries) have improved economies of scale; can produce a wider variety of refined products; can also 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. In this respect, data for 2014 showed that 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, that is close to five million barrels. Thus 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.
Moreover, it makes more sense for Guyana to consider a modular refinery, given that PETROTRIN in Trinidad & Tobago was recently closed down, which has thus prompted CARICOM countries to have to look for a new supplier of fuel. This, therefore, would be a strategic opportunity that Guyana, becoming the next oil producing country in the region, should position itself to advance these avenues in view of providing a better quality of life for its people.