Govt leaning towards small refinery against bigger operations

The content originally appeared on: INews Guyana
Vice President Dr Bharrat Jagdeo

– VP Jagdeo says negatives of large refineries outweigh benefits

With light, sweet crude oil produced offshore Guyana, the Government appears to be favouring the establishment of a small refinery, over a much larger operation, to process the crude for local consumption in order to ensure the country’s energy security in the future.

During a press conference on Friday, Vice President Bharrat Jagdeo disclosed that while the Government has received at least eight or nine proposals for big refineries to be set up here, the conditions for these potential projects are not favourable to Guyana.

While he did not go into details about the proposals submitted, Jagdeo pointed out, however, that some of them are making “outlandish claims”.

These proposals, the Vice President explained, largely presuppose, among other things, that Guyana will have to sell crude to the refinery operator. He added too that the refinery operators would also want fiscal concessions that may be “too lucrative” because of the scale of their investment.

Another negative coming out of those proposals is the fact that the country will have a greater level of carbon emissions since refineries are more polluting.

Small refinery

But while the Government is looking at all of these applications for large refinery operations here, Jagdeo highlighted the need for at least one small refinery in the country to ensure Guyana’s energy security.

“Having a small refinery here could make a big difference for energy security because if we have, for example, hurricanes or any other disaster [in the region] and we can’t get our supply of gas or kerosene or anything else, then having a local refinery – a small one – can make a big difference for national energy security,” the Vice President posited.

According to Jagdeo, while there are a lot of talks and favouring of value-added refinery operations, the concessions that would have to be given or the increased emissions from such a project may “net out some of the other benefits” of such large ventures.

“So, these are the variables we’re looking at now. But you have a number of people out there who are looking to get an MoU from the Government just to shop around. And I’ve seen a lot reported as though this is going to happen tomorrow. I just want to urge caution with that and I’ve given you all the variables that we’re considering in this matter because the energy security is an important issue for Guyana – future energy security,” the Vice President asserted.

Only last month, VP Jagdeo said that Government is prepared to support the establishment of a small refinery, and even sell limited amounts of Guyana’s crude to such a facility.

“We have a lot of proposals here for refineries. Right now, we have several, and we said we’re prepared to sell because I don’t know which one will go forward. So that if it will lend itself to greater energy security – which is a crucial matter for us – so that we have, in situations of crises, the same way we have food crises, that we can have our own domestic supply of gas and everything else; for that reason, we’re prepared to support a small refinery… we’ve had discussions with several groups, and we’re prepared to sell a limited number of barrels of crude to the refinery to make that work,” he said during the Guyana Manufacturing and Services Association’s (GMSA) mid-year dinner in July.

Oil refinery on EBD

Already, a United States investor – Chemtech Limited – is planning to set up a US$200 million oil refinery and integrated petrochemical manufacturing complex on the East Bank of Demerara (EBD) that will employ some 750 persons during its construction and another 300 permanent workers.

According to Chemtech in its project summary, they have already received no-objection letters from the Guyana Office for Investment (GO-Invest) and the Region Four (Demerara-Mahaica) Regional Democratic Council (RDC) for the project, which has a proposed site on 492 acres of land at Plantation York.

“The Government of the Republic of Guyana is seeking to further diversify the economy from oil and gas, mining and the export of logs, there is a need to develop the downstream industry,” the special purpose company explained.

This oil refinery will produce the products that Guyana imports at this time and the excess will be for the markets in the Caribbean. The company went on to list some of the downstream products of the oil and gas sector it will be processing, such as methanol, urea, and melamine, as well as marketable products such as veneer board, formaldehyde and fertiliser. These products, they noted, can generate revenue from exports and domestic profit, as well as the training opportunities for employees.

Its first phase will be focused on the integrated chemical complex, while its second phase will see a port being built to service the oil and gas sector and provide shipbuilding and repairs. All in all, the company estimates the project will cost US$200 million.

According to the company, this project will create several jobs for the wood industry – the engineered board will be termite resistant, and not forgetting this will generate foreign currency. The Engineered Board OSB will be an opportunity to build low-income houses, luxury homes, and pre-fabricated homes for the export market. Veneer Board will allow the manufacturing sector to export world-class furniture.

When it comes to the Environmental Protection Agency (EPA), the company assured that the agency’s requirements will be adhered to and that process and technical data will be available for each plant. They also listed their source of financing as United Securities Trust of Switzerland.

According to the company, the oil refinery will take between 24 and 30 months to construct, while the integrated complex will take between 18 and 24. The project, it assured, would not need natural gas but would utilise products already made from natural gas, such as methanol and urea.

This is even as procurement has already been started by the Government of Guyana for a gas-to-shore project that will include a power plant and a Natural Gas Liquid (NGL) plant, all of which will be constructed under a combined Engineering, Procurement, and Construction (EPC) process within the Wales Development Zone (WDZ). The aim is to deliver rich gas by the end of 2024 for the power plant while the NGL facility is slated to be online by 2025.