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A Refinery for Guyana: Big thinking, bigger risks

“We cannot have crude oil and don’t have security of supply.”

So said President Irfaan Ali on August 26 as he unveiled an expansive conception of a national oil company. According to the Department of Public Information, the company would not invest in offshore production but would be built around a domestic refinery and expanded fuel-storage capacity. Ali said it would look “holistically at the entire ecosystem in terms of the supply” and could eventually position Guyana as a supplier of refined products to CARICOM.

“Ecosystem” is another of the President’s favourite words. It sounds great, but an ecosystem is not a business plan. Who owns the refinery, who finances it, who carries the debt and losses, and where does ministerial supervision end and commercial responsibility begin? Before taxpayers finance another presidential ecosystem, they are entitled to know whether there is a resident economic component inside it.

The President’s big ideas

President Ali has never lacked ambition. Guyana is to become a regional food powerhouse, an energy hub, and a centre for artificial intelligence and big data. There is nothing wrong with a President thinking big. The problem is that the grandiose appears to command far more presidential attention than the day-to-day things affecting the people: the minimum wage, the cost of living, the quality of public services, the suffocating bureaucracy, and the everyday pressures facing ordinary households.

As CARICOM’s Lead Head for Agriculture and Food Security, Ali championed the much-publicised “25 by 2025” initiative, whose central measurable objective was to reduce the Region’s food-import bill by 25 per cent by the end of 2025. In February 2025, CARICOM announced that the initiative would instead be extended to 2030. There were excuses and explanations, including Hurricane Beryl and global supply pressures, but the target had a number and a date, and the date had to be moved.

That matters because Ali has now moved from regional food security to regional energy security. A refinery, however, is not an initiative whose deadline can simply be extended and renamed. Delay means additional interest, idle capital and lost revenue.

Economics of a refinery 

A refinery must first make sense as an investment. Guyana examined that question in 2017, when Pedro Haas conducted a refinery feasibility study for the Ministry of Natural Resources. He concluded that a 100,000-barrel-per-day refinery would not be economically viable and estimated its cost at approximately US$5.2 billion.

That study is almost a decade old and Guyana has changed dramatically. But that does not entitle the Government to disregard an inconvenient conclusion. The first fatal mistake would be to imagine that because Guyana produces crude, Guyana therefore knows how to build and run a refinery. Refining is no task for amateurs, political appointees or enthusiastic novices. It requires experienced petroleum economists, refinery engineers, project-finance specialists, operators and market experts.  If the Government now believes the economics have changed, let it produce a fresh, independent feasibility study prepared by recognised professionals and publish the assumptions, sensitivities and conclusions.

Even successful construction would answer only the first question. A refinery can be built successfully and still fail as a business. Construction is one test; operation is another. The plant must then run reliably and profitably for decades, securing crude continuously, controlling costs, maintaining complex equipment, managing shutdowns, meeting product specifications, handling storage, shipping, insurance and environmental obligations, and selling its output competitively through good refining cycles and bad. Guyana therefore has to prove not only that it can build a refinery, but that it can operate one successfully. The second question may be harder than the first.

One principle should be settled immediately: Guyana’s crude is not free to a Guyana refinery. Government itself recognised this in its 2022 proposal for a 30,000-barrel-per-day refinery, under which crude from Guyana’s profit-oil share was to be supplied at market prices.

Yes, Guyana’s production is vast, and rising. Output is already around 900,000–920,000 barrels per day and is expected to pass one million barrels per day with the fifth FPSO. This is our oil, but the PPP/C and the APNU+AFC have bargained away much of the economic benefit of owning it. Even so, for perhaps another decade or two, Guyana should receive at least 400,000 barrels per day, delivered on a monthly cycle. The issue therefore, is not whether Guyana has enough crude. The issue is whether diverting part of that crude into a refinery produces a better return than selling it on the international market.

Every barrel sent to a state refinery carries an opportunity cost equal to what Guyana could have earned by selling it. The refinery must therefore recover the market value of the crude, all operating and capital costs, and still earn an acceptable return for the risk and the investment. Only the surplus is genuine value added. Refining margins are known to fluctuate sharply. In 2024, the US Energy Information Administration reported global refinery margins at multi-year seasonal lows as petroleum-product demand weakened while refining capacity increased. A refinery has to survive bad years as well as good ones.

Energy security is not a refinery

President Ali’s strongest argument is energy security. Guyana produces crude while importing refined fuels, and he has spoken of storage ranging from 30 to 120 days of supply – an extraordinary fourfold range which itself suggests that the policy has hardly reached the stage of precision.

More importantly, a refinery and energy security are not synonymous. Refineries can themselves become points of insecurity through shutdowns, maintenance, accidents, feedstock interruptions and labour disputes. Security of supply depends on diversification of sources, adequate strategic storage, reliable import arrangements and resilient distribution infrastructure. A refinery may form part of that architecture, but it is neither a necessary nor sufficient condition for energy security.

The lesson is not that refineries cannot work. It is that experience, state ownership and an established industrial base are no guarantee of success. Guyana, with none of Trinidad’s refining experience, should be doubly cautious.

There is a further irony. After Petrotrin closed, Trinidad reorganised around fuel importation, trading, storage and distribution. A country with vastly more refining experience than Guyana pursued energy security without operating a refinery. There is also a political risk. A refinery must not become an employment or rehabilitation programme for GuySuCo or any other troubled state enterprise. Commercial viability, not the need to find jobs or solve another industry’s problems, must determine the investment.

From 12.5% to Nearly 40% – How Long Can the Good Times Last? – Part 4: Conclusion 

Introduction 

Last week’s column ended with Professor Clive Thomas’s estimate that wastage, incompetence, mismanagement and corruption consume 20% of public expenditure. Applied to 2021–2025, that is G$838 billion, or about US$4 billion. My fear is that the true figure is higher.

We cannot know. Too many institutions created to prevent, detect and expose such losses are compromised, years behind, or simply not functioning. At a time of unprecedented revenue, borrowing and expenditure, Guyana is not being asked to invent accountability. The Constitution and laws already provide much of the machinery. The failure is to make it work.

Audit Office

Article 223(7) of the Constitution requires an annual systems and financial audit report on the Office of the Auditor General itself, while sections 43 and 44 of the Audit Act require annual performance and financial reporting and an independent audit. Yet the latest independently audited financial statements on the Audit Office’s own website are for 2022.

Its capacity has also failed to keep pace with public spending. The Budget has risen from G$329.5 billion in 2020 to G$1.558 trillion in 2026, with the Public Sector Investment Programme alone at G$779.6 billion. Auditing major infrastructure requires engineers, quantity surveyors, IT auditors and other specialists. The Audit Act permits technical experts; that power should be used accordingly.

The Office also raises serious questions of independence. On the improperly exercised goodwill of President Ali, Auditor General Deodat Sharma remains in office after attaining the prescribed retirement age. Immediately beneath him is the more qualified and effective Ms. Geetanjali Singh, wife of Senior Minister responsible for Finance Dr Ashni Singh. A Government-commissioned forensic audit concluded years ago that the relationship compromised the independence of the Audit Office. By accident or design, keeping Sharma masks the conflict.

Financial indiscipline runs through successive Auditor General’s reports, but sadly ending there. CH&PA has effectively abandoned annual reports while billions are spent on Silica City without proper public accounting. NDIA spent almost G$13 billion in 2024 although its last audited financial statements were for 2016. Yet, the money keeps flowing. Both entities are audited by the Auditor General. 

There are also duties the Office does not appear to discharge. The Investment Act requires an annual audit and report on tax holidays and fiscal incentives. Over the decades of this Act, none has been done. And despite being put on notice of the treatment of the oil companies’ taxes under Article 15.4 of the Petroleum Agreement, the NRF is audited and opinion issued, without compliance or audit qualification. On both matters, silence is dereliction.

The Public Accounts Committee

The PAC, the next link after the Auditor General, operates years behind and has repeatedly been frustrated by Government members. No Minister should sit on the PAC. Members of the Executive responsible for spending public money should not also sit on Parliament’s principal committee scrutinising that expenditure. If ministerial duties interfere with attendance, appoint Government MPs who are not Ministers.

Central government current and capital expenditure between 2021 and 2025 amounted to about G$4.19 trillion. Yet the PAC remains years behind. The latest Treasury Memorandum I can identify concerns the 2016 Public Accounts and was tabled in 2023! This is totally unprofessional and irresponsible. 

The Public Procurement Commission is worse. There is presently no constituted Commission. The last commissioners’ terms expired in July 2025, and their successors have not been appointed. Meanwhile hundreds of billions of dollars in contracts continue to be awarded. Ministries procure, NPTAB operates and Cabinet retains its statutory no-objection role in major procurements, while the independent constitutional body created to monitor the system has no commissioners. July 2025 did not arrive unexpectedly; the expiry date was known three years beforehand. This pattern defines the post-2020 era. 

Then there is the Integrity Commission. Four members appointed in 2022 were reappointed in 2025. Yet its public reporting tells us little about declarations examined, complaints investigated, breaches established, prosecutions or sanctions. We see defaulters and warnings, but rarely outcomes. Its composition is itself a classic case of loyalty over competence, further weakening confidence as allegations of corruption involving Ministers, parliamentarians, contractors and Government associates arise almost weekly.

The real corruption crisis, therefore, is not merely the number or seriousness of the allegations. It is the absence, weakness or deliberate dismantling of institutions in which the country can have confidence to determine which allegations are true and which are false. 

President Ali’s record hardly inspires confidence on that score: repeal of the State Assets Recovery Act, removing a specialised mechanism for tracing, restraining and recovering State assets believed unlawfully acquired; abolition of the Personal Property Tax, avoiding disclosure; continued support for a Commissioner of Information whose performance has repeatedly attracted serious criticism, while the responsible Minister has failed to ensure that the Commissioner’s reports are laid before the National Assembly as required by law; failure to modernise the Integrity Commission Act and strengthen the asset-declaration regime; and an apparent unwillingness to insist on credible explanations and consequences when ministers are associated with egregious conduct.

The difficulty is compounded because serious questions and allegations have also concerned the President himself over the years: aspects of his earlier academic history, the Pradoville 2 charges arising from his tenure as Housing Minister which were withdrawn without trial, and more recent allegations concerning his farm. Allegations have also involved persons close to him and members of his family, including his non-resident brother. And yes, an allegation is not proof. Nor is family relationship or sudden display of wealth necessarily evidence of wrongdoing. But presidential denial is not independent investigation either.

Conclusion 

These are warning signs of the Resource Curse: unprecedented revenues and borrowing; unprecedented spending; weakened scrutiny; discretionary power; institutions unable or unwilling to keep pace; accountability systematically reduced to form rather than substance; institutional weaknesses exploited for corrupt purposes. 

The near-40% share announced by the Exxon President and repeated – ineptly – by the Guyana President is not guaranteed. Oil prices can fall, recoverable costs can rise and production will eventually decline. More fundamentally, Guyana has the petroleum but not the institutions to match it. Nearly a decade after a Petroleum Commission was proposed, the country still depends heavily on the oil companies for technical direction, project execution and even basic information about a sector the State is supposed to regulate. Critical responsibilities remain concentrated in a Ministry of Natural Resources operating with a team unequal to the technical, commercial and regulatory demands of a world-class petroleum province.

Suriname is embarrassing us. Despite Guyana’s enormous petroleum advantage and earlier start in large-scale production, we would do well to learn from a neighbour that has spent decades building the institutional capacity to manage its petroleum industry.

Guyana therefore risks emerging from the boom with lower revenues but the same debt, spending habits and expectations – and with a State still dependent on the very companies it should be independently regulating, a danger the President and Vice President refuse to confront. That is why the question posed by this series – how long can the good times last? – is not really about oil prices or percentages. It is about whether Guyana can convert temporary petroleum wealth into durable national capacity before the opportunity passes.

Ali’s failure to build the institutions capable of managing, regulating and accounting for this wealth while revenues are abundant risks squandering a unique opportunity. That would be a tragedy of historical and generational proportions – one that will define his presidency more enduringly than all his other shortcomings.

Acknowledgment: My appreciation to readers who commented – both orally and in print – to this extended mini-series 

From 12.5% to Nearly 40% – How Long Can the Good Times Last? – Part 3

Having promised renegotiation and abandoned it on taking office, President Ali offered the country a substitute. The 2016 Agreement would stand, but it would be properly administered. He argued that as leader of a country governed by the rule of law, he was bound by the legal axiom of sanctity of contract. What he offered instead was that the whole of the operations would be thoroughly scrutinised, the finances of the oil companies subject to strict audits, and the national interest protected by good management. That was the bargain put to Guyanese in place of the one they were promised. Parts I and II asked how much Guyana receives from Stabroek and how long the present position can hold. This part asks what becomes of the money once it arrives. Six years on that bargain can be tested, and the last fortnight has tested it.

On 18 August, at a press conference at the Office of the President, Ali announced that Guyana’s share of Stabroek Block oil had risen from 12.5% to 39.8% because the cost bank had been recovered two years early. He described the earlier position in these words: “In terms of barrels, 75% of every hundred barrels produced went to cost recovery.” Seven days later the Ministry of Natural Resources published in the pro-Government Guyana Times a letter headed “Guyana’s profit oil share has always been 50%”, which clarified that the 39.8% “is our share of every single barrel produced, before costs are taken out.”

The letter, which bore no signature, disingenuously sought to blame the politician Sharma Solomon for causing confusion. In fact, it was correcting the President, who was as careless as he was uninformed. But the Ministry was not much better. Take its statement that the 75% cap only “limits how fast [costs] can be repaid”. It does nothing of the sort. It is the ceiling on costs which may be claimed in any one year, or put another way, the floor beneath profit oil in that year. Whether the contractors reached that ceiling in any given year, and therefore whether 75 barrels in every hundred did go to cost recovery, is a question of fact which neither the President nor his Ministry has answered, because neither has ever published the figures.

What these show is a President who does not understand the Agreement and a Ministry which cannot state correctly what the cost recovery ceiling does or how the ministerial audit works. There has been neither renegotiation nor administration, and there is confusion besides. Better contract administration was less a policy than an excuse by an administration which knew its own limitations and chose to proceed regardless, asking no help of anyone. Whether either can be trusted with the Agreement is a separate question, and this column comes to it.

Let us look at another promise made and not kept, one that could have prevented or mitigated some of the dangers we are now facing. That is the Petroleum Commission. In April 2017 the APNU+AFC tabled a Bill in the National Assembly; it was referred to a Select Committee and died with the No Confidence Motion. The PPP/C came to office promising a Commission, and Mr Jagdeo committed to it explicitly and publicly at the consultation on the Local Content Bill on 13 December 2021. In 2026 there is no Bill, no draft and no timetable.

Cost audits, technical compliance and environmental monitoring are only the regulatory part of what such a body would do. Properly constituted, it would be reading the market and putting informed advice before the Minister. Recruiting outside the Public Service is what buys – engineers, cost auditors and lawyers the State cannot otherwise hold, testing production data against the operator’s own, examining cost claims as they are made rather than years later, and keeping the memory a Ministry loses at every change of government.

Instead, all of it rests with a Ministry answerable to the same Minister who deals with the companies obsequiously, and which has never troubled to master the mechanics of the Agreement or its own powers and duties under it.

Unlike its inability to honour commitments made, the Ali Administration is adept at borrowing and spending. Domestic public debt has climbed from G$264.6 billion in 2020 to a projected G$1,245.1 billion this year, and external debt from US$1.320 billion to a projected US$4.355 billion. One thing they understood – and acted on liberally – raising the borrowing ceilings. From G$150 billion prior to 2021 to G$1,500 billion in 2024, and the external ceiling from G$400 billion to G$1,500 billion. Ten times and nearly four, respectively.

Spending was a good companion. Capital expenditure was G$72 billion in 2020. The Public Sector Investment Programme for 2026 is G$779.6 billion, half the entire budget, and public spending between 2021 and 2025 came to some G$8.06 trillion. Savings moved in the opposition direction. The Natural Resource Fund Act 2021 allowed withdrawal of 100% of the first US$500 million of the previous year’s deposits, then 75%, 50%, 25% and 5% of each succeeding US$500 million, and 3% of anything above US$2.5 billion, so that the more the country earned the less of it could be spent. The Fiscal Enactments (Amendment) Act 2024 doubled the blocks to US$1 billion and raised the rates to 100%, 95%, 90%, 85% and 50%. On deposits of US$6 billion the old scale allowed US$1.38 billion out; the new one allows US$4.3 billion. Oh, and it has fixed the books in relation to the taxes paid for the oil companies.

Then there is the Contingencies Fund, which exists for genuinely urgent, unforeseen and unavoidable expenditure. The Constitution and the Fiscal Management and Accountability Act cap advances from it at two percent of the preceding year’s estimated expenditure. On a budget of G$1.558 trillion that two percent is now some G$30 billion. A ceiling written when the budget was a fraction of its present size has grown with it, and what was conceived as an emergency reserve is now a standing appropriation of thirty billion dollars a year, spent first and reported afterwards.

Receiving its largest revenue in history, the Ali Administration rewrote the rule requiring it to save and raised the limits on the amounts it can borrow – both in the same year! It is no longer a case of having money and spending it. It is having money, spending it, and borrowing besides.

Let me close this Part with a frightening thought. Many years ago, Distinguished Professor Clive Thomas put wastage and corruption at 20% of the Budget. I take that as a floor. Capital is now half the budget, and where infrastructure is paid for twice and lasts half as long, the loss on capital alone runs at a third or higher. On the basis of almost daily reports of corruption, the proliferation of discretionary expenditure, and Ali’s unwillingness to take corruption seriously, my own estimate is higher.

But take the Professor’s figure and apply it to the G$4.19 trillion of central government current and capital expenditure between 2021 and 2025. That is G$838 billion lost. It would pay the entire running cost of the State for a year – every wage, every transfer, every pension, every hospital and every school – with change. And nobody can tell us whether the true figure is higher or lower, because every institution that might have counted it is compromised, captive or non-functional.

To be continued

From 12.5% to nearly 40% – How long can the good times last? Part II of II (but see note)

Part I welcomed President Irfaan Ali’s announcement that Guyana’s entitlement from the Stabroek Block production has risen from 12.5% to approximately 39.8%. That percentage reflects mainly the recovery of accumulated exploration and development costs: as less production is required as cost oil, more becomes profit oil. The value of Guyana’s increased share has been magnified by rising production and oil prices, driven in part by geopolitical events including the Russian invasion of Ukraine and, more recently, the closure of the Strait of Hormuz. Meanwhile, much of the Stabroek Block remains unexplored.

The Stabroek Block remains a developing petroleum province, with further exploration and development bringing new recoverable expenditure. New discoveries are of course welcome, but the expenditure is ultimately recovered from production. If costs rise sufficiently, more oil will be required for cost recovery, reducing profit oil and Guyana’s share. The movement from 12.5% to nearly 40% should therefore not be regarded as permanent.

ExxonMobil’s claim of force majeure over acreage affected by Venezuela’s territorial claim adds another dimension. Any extension of the exploration period postpones relinquishment and potentially allows additional exploration and development expenditure to enter the cost-recovery pool. Government should disclose the acreage and obligations affected, the period of any extension and its consequences for relinquishment. Time and acreage in Stabroek have considerable value and cannot be treated simply as matters between the Government and ExxonMobil – still less as matters for ExxonMobil alone.

The other major variable is oil price. Guyana is enjoying both a much larger share of production and sharply higher prices following the war involving the United States, Israel and Iran. At the illustrative US$90 used in Part I, Guyana’s 41.8%, including the 2% royalty, is worth US$37.62 per barrel. At US$70 the same percentage produces US$29.26 and at US$60, US$25.08. At current production levels, the difference quickly runs into billions of US dollars. The percentage has not changed, but the value of what Guyana receives certainly has.

The Bank of Guyana’s figures put the revenue surge in perspective, though they do not establish the 39.8% share. For the first six months of 2026, petroleum receipts into the Natural Resource Fund were approximately G$378 billion, compared with G$224.7 billion for the same period in 2025 – a rise of about 68%. Profit-oil receipts rose by approximately 76%. These remarkable numbers reinforce the need for Government to publish the calculations and production data behind the announced 39.8%.

Peace in Ukraine and with Iran, whenever it comes, could remove a substantial part of the current price windfall. Equally, increased recoverable exploration and development expenditure could reduce Guyana’s percentage even if oil prices remain high. Guyana’s extraordinary fortune is that both variables are presently working in its favour: cost recovery has fallen substantially while oil prices have risen sharply. Neither can be assumed to continue indefinitely.

None of this results from any change in the 2016 Petroleum Agreement. The royalty remains 2%; profit oil continues to be divided equally; and the cost-recovery, tax and stabilisation provisions remain. What has changed is the economics of the Stabroek Block. Petroleum companies are entitled to returns commensurate with the risks they undertake, and exploration can undoubtedly result in enormous losses, but that argument carries considerably less weight today than it did in 2016.

The Stabroek Block today is a proven petroleum province with enormous resources already discovered multiple developments and exceptional production. Much of the early expenditure has been recovered, the risks have diminished considerably, yet the fiscal terms remain essentially those agreed in 2016. There is therefore no contradiction between welcoming Guyana’s greatly increased revenues and continuing to regard the Agreement as inequitable. A modest share of an enormously profitable enterprise can still produce a very large cheque; the size of the cheque does not establish the fairness of the bargain.

Part I demonstrated another aspect of that bargain. Even as Guyana’s profit-oil share rises, equal profit oil does not mean equal economic benefit because the contractors enjoy substantial tax advantages under the Agreement. The billions now flowing to Guyana are therefore evidence of the exceptional value of the Stabroek Block, not proof that the contractual division of that value was fair or reasonable.

Under pressure from the independent press, especially Kaieteur News, President Ali repeated the announcement earlier made by ExxonMobil Chairman Darren Woods. Having repeated the figure, he should substantiate it after confirmation from Woods and the Ministry of Natural Resources. Guyanese should be told whether the 39.8% includes the 2% royalty, the current balance of unrecovered cost, expected exploration and development expenditure, and the projections for cost oil and profit oil over the next several years. We should also know whether the 39.8% is expected to rise, remain broadly stable or decline as additional expenditure enters the accounts.

This is not information of merely commercial interest or reserved for specialists. Petroleum revenues are now central to the national finances and the percentage of production accruing to Guyana affects present revenues, future budgets and the resources available to succeeding generations. Parliament and the public therefore have a legitimate interest not merely in the headline percentage announced by ExxonMobil and repeated by the President, but in the figures, assumptions and projections behind it. Transparency requires more than announcing good news; it requires providing the information by which that news can be understood and independently assessed.

Guyanese are understandably frustrated by the obstinate refusal of President Ali and Vice President Jagdeo to entertain even the mildest suggestion that they invoke the renegotiation provisions of the 2016 Agreement, as they had promised to do. Having secured the electorate’s trust partly on that promise, they abandoned it on taking office. The hypocrisy is obvious, but it goes further: it is a betrayal of the electorate and – to use Jagdeo’s own words – a selling out of the national interest.

Note: The scale of the increase in oil revenues raises issues which go well beyond the 2016 Agreement. I have therefore decided to add a Part III – this coming Friday – examining the danger of this explosion in oil revenues becoming a licence for more waste, uncontrolled corruption and destructive economic management.