Guyana government warned against investing too much in oil refinery


GEORGETOWN, Guyana (CARIBUPDATE/Nov 7, 2016) - With a required 20 to 30 square kilometer of land somewhere along Guyana’s coastal belt to build a refinery, and a deep-water channel with a one kilometer width to access it from the Atlantic Ocean, a leading mind in the oil exploration industry is warning Guyana that it will cost somewhere around G$900 billion dollars (about US$4.4 billion) to build an efficient oil refinery there.

This figure would represent an amount that is more than three times the country’s foreign debt, or almost four years of the country’s entire national budget; – arguably a price tag that would immediately sink Guyana into bankruptcy.

Continuous costing to cover facilities maintenance and salaries for even just the most essential personnel would also mean forking out just around G$3 billion per month; – an extremely prohibitive figure by Guyanese budgetary standards.

And no one in the oil industry can think of any investor or conglomerate that will be willing to risk that volume of investment money for a refinery, considering the shaky ground that oil is on, and the fact that it is now an almost unprofitable commodity to invest it.

At least this is the view of Michael Boer, a former research analyst at British Petroleum (Bp), one of the leading oil and gas producing companies in the world.

In an exclusive interview with the Guyana Guardian, Boer who is currently stationed in Dubai and now handles international oil market research for the Saudi Government explained that it will be a grave mistake for the Guyana government to redirect its focus on oil, and to heavily pour tax payers money into it.

It is a move which he says they would later come to regret.

He said that considering the projected long term volatility of oil, the state needs to start pushing the international private sector and other cash holding foreign governments like China to the forefront of any oil risk investment in Guyana.

Otherwise the State needs to keep its own money out, and simply regulate the industry and bring needed royalties in from these investors, while continuing to guard tax payers’ money against any potential fallout from oil.

Mr. Boer explained that Guyanese should look at Venezuela as a perfect example of what can happen when the State decides to pour its tax dollars into oil.

That country is now facing a serious economic crisis that has transcended into socio-economic chaos, after global oil prices began to tumble in 2014.

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