On the 14th of January, the Government decided to refuse permission to CT Power to build a coal-fired power station in the west of the island. However, just three days later, while local environmentalists were still celebrating, the Minister of Trade and Industry announced to the world that the Government wants to build an oil refinery in the south of the island and have it operating by 2015.
The reasons he gave are as follows: it would diversify Mauritius’ economic base, it would reduce the price of petrol and diesel on the local market, if Singapore can do it – so can we.
The profitability of an oil refinery depends on three main factors: the cost of buying crude oil, the price at which petroleum products can be sold and how close the plant is to full capacity. The price of crude oil is set by international markets. The price of petroleum products closely follows the price of crude oil with a small margin that depends largely on the global surplus in oil refinery capacity. The greater the surplus, the greater the competition between refineries, leading to lower margins. (See this graph of volatility of margins.) The closer a plant is to full capacity, the more efficient it is, which tends to make the profits/losses even more volatile than the margins. Does Mauritius really want to introduce more uncertainty into its economy?
Because the margins for petroleum products are small, consumers in Mauritius will see little benefit from having a local refinery. However, the consequences to the environment of leakages both at the refinery and during transfer and transportation may be catastrophic for an island that depends on its fragile reefs for tourism. In contrast, very few tourists visit Singapore for a beach holiday. While Singapore may have oil refineries, they are mostly owned and operated by international oil giants and integrated into a large petrochemical industry. Therefore the comparison between Mauritius and Singapore is not a valid one.
The Minister stated that the proposed refinery would cost $2 billion and the Government would be the major shareholder. Surely this amount of money would be more wisely spent on making Mauritius less rather than more dependent on fossil fuels? Why not invest in renewable energies, electric mass transport and a smart grid that would dramatically reduce our import bills? Isn’t that the whole point of “Maurice Ile Durable”?