The Economy: The economic benefits of a modular oil refinery


There has been some discussions recently in the press on revisiting the feasibility of an oil refinery in Guyana amidst the declaration of more oil finds. Guyana now has in excess of six billion [declared] recoverable oil reserves offshore. Given this perspective, the idea of an oil refinery might well be feasible.

One would recall that the Government of Guyana had contracted an international consultant to conduct a feasibility study of an oil refinery in Guyana. That presentation concluded that an oil refinery (a conventional refinery) would not be feasible in Guyana against the backdrop of the capital investment it would require which was estimated at some US$ 5 billion. Indeed, Guyana cannot afford such investment even if the capital were to be mobilized through a public-private partnership – because US$5 billion is greater than Guyana’s GDP which is merely close to US$ 4 billion and real GDP is about US$ 2 billion.

However, there are refineries that are far less costly to build which are known as “modular refineries”. These refineries are usually capable of producing 5,000 – 30,000 barrels of crude per day. These types of refineries have also experienced a trend in growing demand – largely driven by government initiatives in countries such as Nigeria and Indonesia for example, to add local refining capacity to offset continued growth of importing finished products for growing consumer demand (UOP, 2017).

Advantages and Disadvantages of Modular Refineries

The advantages of the modular refineries include: lower investment costs, sized for lower-local demand, modular fabrication offsite for higher quality, shorter schedule, and possibility for future relocation. The disadvantage in comparison to the traditional larger refineries is that these (traditional refineries) have improved economies of scale and can produce a wider variety of refined products, and can also be integrated into petrochemical operations and offer more flexibility (UOP, 2017).

Basic Refinery Economics

“In the oil refining business, the cost of inputs (crude oil) and the price of outputs (refined products) are both highly volatile, influenced by global, regional, and local supply and demand changes. Refineries must, therefore, find the “sweet spot” against a backdrop of changing environmental regulations, changing demand patterns and increased global competition among refineries in order to be profitable”. (Canadian Fuels Association, 2013).

The economic sensibility of a modular refinery in Guyana’s context

In order to determine the viability of a modular refinery with a production capacity of 30,000 bpd, it is prudent to first establish what is the current demand or consumption of refined crude oil products, particularly fuel. To do so, data is readily available on the Guyana Energy Agency website as illustrated in the table below:

MOGAS: Unleaded 1,174,006 143,806,446
GASOIL/DEISEL 2,139,198 260,334,967
KERO 86,930 10,819,182
AVJET 70,196 8,744,200
FUELOIL 1,257,255 116,133,335
AVGAS 9,774 2,011,612
L.P.G 201,497 19,783,956
TOTAL 4,938,855 561,633,697


Given the above data for 2014, total imports of refined crude products inclusive of C.I.F (cost, insurance and freight) values, amounted to US$561.6 million, and in terms of quantity, that is close to five million barrels. So, we can safely say Guyana’s average annual consumption is about five million barrels of crude annually which works out to 13,700 barrels of crude per day.

Therefore, a modular refinery with production capacity of 30,000 barrels per day would be able to satisfy Guyana’s local consumption needs of refined crude products, which would also save a hefty import bill of in excess of US$500 million annually, and the excess production can easily be exported to other CARICOM countries.

In fact, this is more reason why Guyana should start considering a modular refinery given that Petrotrin in Trinidad & Tobago was recently closed down which thus prompted CARICOM countries having to look for a new supplier of fuel. This, is therefore a strategic opportunity that Guyana, becoming the next oil producing country in the region, should position itself to advance these avenues and maximize profit.

It is therefore hoped that this article can stimulate more intellectual and serious discussions in this regard, especially from the nation’s politicians.

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