New oil discoveries in Guyana make discussion of local refinery more relevant

Published: August 13, 2018

As US oil major ExxonMobil continues to discover more oil off the Guyana coast, discussions about the establishment of a refinery in the South American country will become more relevant. A study conducted in 2017 found that pursuing such a venture would have been too costly, and based on the known reserves at the time and projected rate of production, it was felt that no investor would be willing to take the risk.

Fast-track to 2018 and ExxonMobil’s 8th discovery in Guyana has pushed total estimated recoverable reserves to more than 4 billion barrels of oil with projected daily output potentially exceeding 750,000 barrels per day by 2025.

Former Trinidad and Tobago Energy Minister, Kevin Ramnarine, believes that the more discoveries that are made the more relevant discussions about building a refinery in the country will become. “When the discussion was happening last year on whether to refine or not to refine, the level of discovery and projected production was nowhere close to what it currently is now. That discussion around a refinery may come up back again,” he told OilNOW in a recent interview in Georgetown.

Current estimates on production, he said, may be conservative and when one takes into account the potential for more discoveries in the Stabroek as well as other blocks, the number is likely to be far more significant.

“So the discussion on whether to refine or not to refine is a discussion that should not be put away in Guyana. It’s a discussion which I think should be ongoing in this country. If there is no refinery in this country it means that you have to import refinery products. It would be a government decision at that point in time whether to use the revenues from the exports to subsidize the imports of refined products,” he said.

In May 2017, Pedro Haas, Director of Advisory Services at Hartree Partners, presented a report based on a study commissioned by the Guyana government to determine if it was feasible for the country to set up an oil refinery. Haas outlined a number of scenarios that saw the cost of setting up such a facility exceeding US$5 billion.

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 had pointed out.

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