A Refinery for Guyana: Big thinking, bigger risks
“We cannot have crude oil and don’t have security of supply.”
So said President Irfaan Ali on August 26 as he unveiled an expansive conception of a national oil company. According to the Department of Public Information, the company would not invest in offshore production but would be built around a domestic refinery and expanded fuel-storage capacity. Ali said it would look “holistically at the entire ecosystem in terms of the supply” and could eventually position Guyana as a supplier of refined products to CARICOM.
“Ecosystem” is another of the President’s favourite words. It sounds great, but an ecosystem is not a business plan. Who owns the refinery, who finances it, who carries the debt and losses, and where does ministerial supervision end and commercial responsibility begin? Before taxpayers finance another presidential ecosystem, they are entitled to know whether there is a resident economic component inside it.
The President’s big ideas
President Ali has never lacked ambition. Guyana is to become a regional food powerhouse, an energy hub, and a centre for artificial intelligence and big data. There is nothing wrong with a President thinking big. The problem is that the grandiose appears to command far more presidential attention than the day-to-day things affecting the people: the minimum wage, the cost of living, the quality of public services, the suffocating bureaucracy, and the everyday pressures facing ordinary households.
As CARICOM’s Lead Head for Agriculture and Food Security, Ali championed the much-publicised “25 by 2025” initiative, whose central measurable objective was to reduce the Region’s food-import bill by 25 per cent by the end of 2025. In February 2025, CARICOM announced that the initiative would instead be extended to 2030. There were excuses and explanations, including Hurricane Beryl and global supply pressures, but the target had a number and a date, and the date had to be moved.
That matters because Ali has now moved from regional food security to regional energy security. A refinery, however, is not an initiative whose deadline can simply be extended and renamed. Delay means additional interest, idle capital and lost revenue.
Economics of a refinery
A refinery must first make sense as an investment. Guyana examined that question in 2017, when Pedro Haas conducted a refinery feasibility study for the Ministry of Natural Resources. He concluded that a 100,000-barrel-per-day refinery would not be economically viable and estimated its cost at approximately US$5.2 billion.
That study is almost a decade old and Guyana has changed dramatically. But that does not entitle the Government to disregard an inconvenient conclusion. The first fatal mistake would be to imagine that because Guyana produces crude, Guyana therefore knows how to build and run a refinery. Refining is no task for amateurs, political appointees or enthusiastic novices. It requires experienced petroleum economists, refinery engineers, project-finance specialists, operators and market experts. If the Government now believes the economics have changed, let it produce a fresh, independent feasibility study prepared by recognised professionals and publish the assumptions, sensitivities and conclusions.
Even successful construction would answer only the first question. A refinery can be built successfully and still fail as a business. Construction is one test; operation is another. The plant must then run reliably and profitably for decades, securing crude continuously, controlling costs, maintaining complex equipment, managing shutdowns, meeting product specifications, handling storage, shipping, insurance and environmental obligations, and selling its output competitively through good refining cycles and bad. Guyana therefore has to prove not only that it can build a refinery, but that it can operate one successfully. The second question may be harder than the first.
One principle should be settled immediately: Guyana’s crude is not free to a Guyana refinery. Government itself recognised this in its 2022 proposal for a 30,000-barrel-per-day refinery, under which crude from Guyana’s profit-oil share was to be supplied at market prices.
Yes, Guyana’s production is vast, and rising. Output is already around 900,000–920,000 barrels per day and is expected to pass one million barrels per day with the fifth FPSO. This is our oil, but the PPP/C and the APNU+AFC have bargained away much of the economic benefit of owning it. Even so, for perhaps another decade or two, Guyana should receive at least 400,000 barrels per day, delivered on a monthly cycle. The issue therefore, is not whether Guyana has enough crude. The issue is whether diverting part of that crude into a refinery produces a better return than selling it on the international market.
Every barrel sent to a state refinery carries an opportunity cost equal to what Guyana could have earned by selling it. The refinery must therefore recover the market value of the crude, all operating and capital costs, and still earn an acceptable return for the risk and the investment. Only the surplus is genuine value added. Refining margins are known to fluctuate sharply. In 2024, the US Energy Information Administration reported global refinery margins at multi-year seasonal lows as petroleum-product demand weakened while refining capacity increased. A refinery has to survive bad years as well as good ones.
Energy security is not a refinery
President Ali’s strongest argument is energy security. Guyana produces crude while importing refined fuels, and he has spoken of storage ranging from 30 to 120 days of supply – an extraordinary fourfold range which itself suggests that the policy has hardly reached the stage of precision.
More importantly, a refinery and energy security are not synonymous. Refineries can themselves become points of insecurity through shutdowns, maintenance, accidents, feedstock interruptions and labour disputes. Security of supply depends on diversification of sources, adequate strategic storage, reliable import arrangements and resilient distribution infrastructure. A refinery may form part of that architecture, but it is neither a necessary nor sufficient condition for energy security.
The lesson is not that refineries cannot work. It is that experience, state ownership and an established industrial base are no guarantee of success. Guyana, with none of Trinidad’s refining experience, should be doubly cautious.
There is a further irony. After Petrotrin closed, Trinidad reorganised around fuel importation, trading, storage and distribution. A country with vastly more refining experience than Guyana pursued energy security without operating a refinery. There is also a political risk. A refinery must not become an employment or rehabilitation programme for GuySuCo or any other troubled state enterprise. Commercial viability, not the need to find jobs or solve another industry’s problems, must determine the investment.