General refinery economics reveals no overall economic justification for a state-owned oil refinery

Introduction

Last week’s column focused on reviewing the results of Pedro Haas’ feasibility study for a state-owned oil refinery, sponsored by the Ministry Natural Resources (MoNR). Its results drove me to pronounce on Decision Rule 2, which states: the feasibility study makes clear that there is no overall economic justification for proceeding with a state owned, controlled and operated oil refinery. And, specifically one based on a required production of 100,000 barrels/day, in order to be “competitive”. In this circumstance around 80 percent of the crude input would be producing refined products for export.

Rule 2 complements Rule 1, which had earlier posited: there can be no serious economic objection to either private investors (local and/or abroad) or external National Oil Companies (NOCs) building a local refinery, which they wholly own, control and operate, provided this does not require any out-of-the ordinary state support, including domestic market protection, price accommodation, or tax expenditures…..

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Local content requirements do not support wastage of public resources on an oil refinery

Introduction Today’s column, and the next, continues to evaluate the feasibility of a Guyana state-owned oil refinery, promoted by many as the leading edge of a local content requirements (LCRs) regime aimed at maximizing downstream domestic value-added in the coming petroleum sector.

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Queries in support of Decision Rule 2

Introduction In last week’s column I sought to recall, for the benefit of readers, several key observations and conclusions that were drawn from my earlier review of refinery economics in order to support Decision Rule 2.

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Decision Rule 2: No overall economic justification for a state-owned, controlled and operated oil refinery

Introduction Last week’s column was aimed at walking readers who are unfamiliar with economic feasibility studies, through the PowerPoint presentation by Pedro Haas of Hartree Partners, on the feasibility study for a state-owned Guyana refinery.

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More on formulating Decision Rule 2: The Haas Guyana Refinery Study

Introduction Today’s column aims at walking readers through the Guyana Refinery Study, presented in a talk by Pedro Haas of Hartree Partners, in May this year.

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Formulating Decision Rule 2: A state-owned oil refinery

Introduction Last Sunday’s column (September 3) marked one year of uninterrupted weekly articles addressing the topic: ‘Guyana in the coming time of its oil and gas industry, circa 2020’.

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