Setting up an oil refinery in Guyana will not be economically viable based on a detailed study carried out to look into the matter.
Pedro Haas, Director of Advisory Services at Hartree Partners, made the disclosure today at a public presentation of his findings based on a study to determine if it was feasible for Guyana to set up an oil refinery.
Haas outlined a number of scenarios that saw the cost of setting up such a facility could be as much as US$5 Billion.
“Building and operating an oil refinery is risky and requires significant capital investment,” Haas said.
The consultant pointed out that factors that would drive up the cost to build a refinery in Guyana included the country’s location and the lack of technical skills and much needed equipment and supplies. These would have to be imported which would serve to increase production cost. Building or utilizing a facility in a location where technical skills and other necessary infrastructure already exist would allow for a less-costly option.
Haas said even in the best-case scenario of US$2.4B, embarking on such an investment would mean starting off at almost a 50% loss on the investment.
Because the economics are negative, Haas said under these circumstances the investor “would never be paid back.”
The notion that setting up a refinery in-country will serve to guard against price shocks, as have been argued by some observers in the field, was discounted by Haas who said the economics for that theory do not add up.
Oil prices, being controlled by international factors beyond Guyana’s control, means that the country can do very little, internally, to insulate itself from price shocks in the industry.
Around 300 persons attended the public forum, which was held at the Marian Academy in Guyana’s capital, Georgetown.
Minister of Natural Resources, Raphael Trotman, other government officials, and members of the business community were among those who participated in the event.
