Should Guyana build a small refinery?

Sep 12, 2026 Features / Columnists, Peeping Tom

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(Kaieteur News) – The public discourse, thus far, on a refinery for Guyana asks some legitimate questions about cost, management, financing and commercial risk. But it makes a fundamental analytical mistake of evaluating the proposed Guyanese refinery as though its purpose were to become another Petrotrin—a medium-scale refinery competing in international markets for export sales.

That is not the proposition that Guyana has in mind. The proposal has consistently been for a relatively small modular refinery designed principally to secure Guyana’s domestic fuel supply.

When President Irfaan Ali announced the 30,000-barrel-per-day proposal in 2022, he explicitly described it as being for national energy security. That changes the economics.

A refinery intended to compete with refineries around the world must demonstrate that its products can be produced and sold at a competitive international price. A refinery established principally to supply a domestic market has a different test. The relevant question is whether it can supply that market reliably and at a lower or more stable cost than importing the equivalent petroleum products.

This is where the discussion in Guyana needs to become more sophisticated. Consider the price of petrol. Guyana is a major crude-oil producer, yet the country remains dependent on imported refined petroleum products. Even after substantial reductions in the excise tax on fuel, the retail price of gasoline remains strikingly high by international standards.

The government has progressively reduced the tax burden on imported fuel, and in February 2026 the excise tax on gasoline was reduced to zero. If, after removing or sharply reducing the fiscal component of the price, Guyanese consumers are still paying prices broadly comparable with those in the United States, that should prompt a very simple economic question: what is the landed cost of the imported product, and how much of that cost could be eliminated or reduced through domestic refining?

Guyana does not need to establish that a domestic refinery can produce gasoline more cheaply than every refinery in the world. It needs to establish whether a properly designed refinery can produce the fuel required by Guyanese consumers at a cost below the cost of importing that fuel. That is a much more attainable proposition.

Suppose, for illustration, that a domestic refinery cannot compete successfully in the export market because its production costs are higher than those of the world’s largest and most efficient refineries. That does not necessarily make the refinery irrational. If the alternative is to continue importing petroleum products at a higher delivered cost, the refinery may still make economic sense.

Guyana’s objective should not be to become another Singapore, Rotterdam or Houston. It should be to ensure that when a tanker is delayed, when international freight rates surge, when a geopolitical crisis disrupts supply chains, or when international refinery margins suddenly explode, Guyana does not discover that producing nearly one million barrels of crude oil a day provides little protection for the ordinary motorist who cannot find reasonably priced gasoline. This is what “energy security” means in practical terms.

And here the comparison with Petrotrin is instructive. Petrotrin was a very different proposition. Its refinery had a capacity of approximately 140,000 barrels per day, while Trinidad’s domestic crude production had fallen to about 40,000 barrels per day. The result was that roughly 100,000 barrels of crude had to be imported each day to keep the refinery supplied. Trinidad was therefore operating a large refinery while simultaneously facing a structural shortage of domestic feedstock.

That was a profound economic problem. Petrotrin was also expected to operate as a commercial enterprise in a competitive international refining environment. Its challenge was not simply to supply Trinidad. It had to process crude at competitive cost and compete against international suppliers. The company’s own restructuring debate acknowledged that the refinery was producing losses and that its business model was unsustainable.

Guyana faces the opposite structural condition. Guyana has an extraordinary abundance of crude and a relatively small domestic market.

That means the Guyanese refinery does not have to be designed around the assumption that it must consume 140,000 barrels of crude every day. The earlier Guyanese proposal was for approximately 30,000 barrels per day, with the government providing access to crude from its share of profit oil. The original procurement documents envisaged a privately financed and privately owned facility, rather than the government itself becoming the owner and operator.

That is a radically different proposition from Petrotrin. Indeed, the central lesson of Petrotrin should be: do not build a refinery whose scale, cost structure and business model are divorced from the country’s actual circumstances.

Guyana does not need to repeat that mistake. A small modular refinery can be designed around domestic demand. It can be sized to provide a substantial portion of the country’s gasoline, diesel and other petroleum-product requirements without creating the enormous capital burden and export dependency associated with a 140,000-barrel-per-day facility.

There is another important point. Guyana’s crude, admittedly, is not free. But that does not end the analysis. If Guyana supplies crude to a domestic refinery at its opportunity cost, the refinery must still demonstrate that the resulting petroleum products can be produced at a competitive cost relative to imported alternatives.

That is precisely what a feasibility study should establish. The answer may ultimately be that the refinery is uneconomic. If so, Guyana should not build it.

But the answer may also be that the refinery cannot compete as an exporter while being entirely viable as a domestic supplier. That would not be a contradiction. It would simply mean that Guyana is pursuing the correct objective.

The real question for Guyana is therefore not whether it can build a refinery capable of defeating the world’s largest refineries in international competition. It is whether Guyana can build and operate a refinery whose cost of producing fuel for Guyanese consumers is lower than the cost of importing that fuel, while providing greater security of supply?

If the answer is yes, then the refinery has an economic rationale even if it never exports a single barrel of gasoline. This is the feasibility study that we should be encouraging.

The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper

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• Guyana oil refinery, Peeping Tom, Petrotrin

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