Gov’t can’t afford oil refinery – Trotman

Government cannot afford to invest US$5B in an oil refinery here and has ruled out undertaking that initiative but will support independent investors who can.

“We have done some studies on the feasibility of an oil refinery. We have opened that study for public debate and discussions… Government has concluded that it as a government, cannot spend US$5B dollars in an oil refinery,” Minister of Natural Resources, Raphael Trotman yesterday told a private sector summit at the Marriott Hotel.

“We are not in any way dissuading the private sector from taking up the challenge,” he added, while informing that there “is one initiative for a modular refinery, a much smaller one in Region 10.”

Trotman said that his government would support private investment proposals, giving them “favourable recognition” once they met “good standards and guidelines.”

Delivering a presentation on energy, Trotman explained that the feedback from the public remains active on the report of a feasibility study that government had undertaken, through the Hartree firm, but that his government simply could not spend the huge sum on the risky investment.

According to Pedro Haas, the Hartree director, who was tasked with carrying out a feasibility study, the cost to construct such a facility would be some US$5 billion, and would see at least half the invested amount lost upon commissioning.

He told a public forum back in May of this year that building an oil refinery would be a very risky investment which would require a vast amount of capital. The refinery question has arisen in light of ExxonMobil’s plans to begin pumping oil from its Liza well around 2020.

Haas explained that when calculating the cost to build refineries, the industry’s jargon presents it as a cash amount per barrel of oil. “For many years, refinery cost to build was about US$10,000 to a barrel and then it changed and rose to about US$20,000 and about, today it could be up to US$25,000”, he observed.

As such, Haas pointed out that when calculating the cost for the refinery here, the latter figure was used. Initially the company started out their calculations based on a 250,000 barrel per day refinery, but had to scale it down to a 100,000 barrel per day refinery. Additionally, because the company was only exposed to data from 2013, it had to factor in an inflation adjustment for the present, along with adjustments for the location since there would be a need for new infrastructural facilities and other ancillary facilities to support and run alongside a refinery.

Trotman’s main focus was explaining plans for the energy sector and he told the summit that government was working with all stakeholders, to have an energy mix that best catered for the country’s needs even as it complemented its green energy agenda and economy. “We are mindful that a healthy balance has to be struck,” Trotman said.

And because the country was new to the oil and gas production sector, government has sought help from several international partners to ensure its objectives were achieved.

These include the European Union, Conservation International, the United Nations Development Programme, the Commonwealth Secretariat and countries such as the Kingdom of Norway and the United States among many others.

Trotman told attendees that government was “working to be more inclusive” and that his presence at yesterday’s forum was to demonstrate that they were not there “to compete but to share ideas and cooperate.”