Has President Ali awarded the Berbice oil refinery contract to India?

Jan 28, 2023 Letters

Dear Editor,

Reference is made to the letter entitled ‘India has done much for Guyana, it has not been treated well’ penned by Vishnu Bisram (Kaieteur News, January 23, 2023). The author reviews the many economic links between India and Guyana, since the nation’s independence in 1966. He emphasizes that India had been providing financial support to Guyana over the last decades, when the country was in need. What struck me however most was the following statement:

“On oil development, it was welcome news when President Ali announced that India has agreed to build an oil refinery in Guyana and also partake in investment in other manufacturing activities.”

This announcement by Mr. Bisram stood out and immediately raises many questions. To my knowledge, the Government of Guyana has made no public announcement about who had won the contract to construct Guyana’s first oil refinery. How come Mr. Bisram, who had accompanied the President on his recent visit to India, knows more than the general public and the press?

Let me review briefly the recent history of the Berbice oil refinery project, which is to be located at the mouth of the Berbice River in the vicinity of Crab Island. The Government through the Ministry of Natural Resources issued on Friday, October 14, 2022, a Request for Proposals (RFP) from interested companies to design, finance, construct and own the nation’s first oil refinery. The proposed facility should have a capacity of 30,000 barrels of oil per day.

As incentives to potential investors, the Government would provide 30 acres of land, grant a ten-year tax holiday, provide a supply of feedstock oil from Guyana’s share of profit oil at market prices, and insure access to the domestic market for sale of refined products. Importantly, the Government of Guyana would not provide any financing for the proposed refinery. Hence, the financial risks of the enterprise would solely rest on the shoulders of the investors. Overall, this was a sound and reasonable proposal despite the fact that several oil industry experts have raised concerns about the viability of a small-scale refinery in Guyana.

The complete lack of a labor force with knowhow in the oil refinery business was cited as one of many factors making the establishment of an oil refinery in Guyana costly and uneconomic. As a reminder, Trinidad’s oil refinery went bankrupt a couple of years ago. On December 17, 2022, the National Procurement and Tender Administration Board (NPTAB) announced that seven firms had submitted bids to construct the oil refinery.

Now just six week later, it appears that the bidding process has been aborted and India won the tender process for the oil refinery according to Mr. Bisram. It is presently unclear, if his information is correct, as there has to date been no public announcement made by the Government supporting his notion. It was however reported in the press today that India’s Prime Minister Narendra Modi is expected to visit Guyana later this year. Could Prime Minister Modi be traveling to Guyana to sign the oil refinery deal?

As it stands, there are many unanswered questions regarding the oil refinery project. Has the project been indeed awarded to India? If true, what made India or an Indian Contractor win over the other seven bidders? Did independent experts assess the different bids for feasibility and economic soundness? Was the Public Procurement Commission (PPC) involved in the assessment process? What are the projected costs of the oil refinery? Will the winning project require now Government funding, which has been ruled out in the past? The Government’s RFP of October 14, 2022asks for construction to start by first quarter 2023 with completion of the oil refinery no later than two years after start date. This is a very ambitious time line and leaves realistically not time for an in-depths Environmental Impact Assessment (EIA) as required by the law. Is the Government, particularly the EPA, aware of these constraints? Shouldn’t the time line be revised? At this point, it is essential that the Ali administration informs the general public in a transparent manner about the status of the oil refinery project.

Sincerely,

Andre Brandli, PhD

Professor

LMU Munich

Andre Brandli, Government of Guyana, oil refinery, PhD, President Ali, Vishnu Bisram

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Has President Ali awarded the Berbice oil refinery contract to India?

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