Introduction – Re-cap
As posited last week, it is my view that the true essence of an oil refinery that is deemed local, lies in its type (form) of ownership, management, and operationalized control. In this regard, I had identified three broad existing types, namely 1) a refinery, wholly owned/managed/operated by foreign investors (for example, an international oil major; a foreign National Oil Company (NOC); or, some type of joint arrangement among the two; 2) a refinery that is similarly, wholly owned/managed/operated by domestic private investors, with or without a joint arrangement involving foreign private investors or a NOC. In these two instances, Guyanese taxpayers and consumers carry no financial responsibility whatsoever for the success or otherwise of the project. Crude oil sold to the refinery by the government out of its profit share would therefore, take place at arm’s length.
To ensure the latter effectively applies, government support for the project should not exceed that which is currently allowed for such investments. In other words, no special subsidies, tax expenditures, or price protection, outside prevailing levels would be afforded to the local refinery. In the two instances indicated here, I would have no reservation over the establishment of a local oil refinery. Indeed I would go further and claim, it would be presumptuous of me (or any outsider), to object to it in a capitalist free market-based economy like Guyana.
It is only in instances of the third type; that is, where either 1) Guyana oil resources, 2) taxpayers’ funds or 3) consumers are forced to carry financial responsibility for the success of the project that outsiders would have a legitimate case for passing judgement on its efficacy. And, it is that circumstance, which will be the exclusive focus of my comments on the wisdom or otherwise for Guyana establishing its own oil refinery…..