Centrifugal compressor is used for low pressure applications. R123 is a refrigerant which has condenses at ambient temperature at even 90 psi. A thumb rule for type of compressor and capacity is like this.
Upto 100TR - Reciprocating compressor
100TR to 300TR - Screw compressor
200TR and above - Centrifugal compressor
1 TR = 12000 BTU/Hr = 3024 kCal/Hr(approx)
Basically it is because of effciency at low load conditions. Centrifugals have very good efficiency at low loads with combined guide vane control and variable speed arrangement. Recips are not good above 100 TR. It is not that there are no smaller screws. I saw screw chillers of 50TR capacity also.
Yes, cooling is done by oil. The capacity control is done by a solenoid type plunger which controls refrigerant flow into the compressor based on the temperature of the chilled fluid. I have a personal dislike to screws because of their metallic noise. If you do something in this regard, that would be much better. The oil you are using shuld be compatible with the refrigerant.
I am not sure, if varying the speed of positive displacement compressors decrease power consumption or not. Basically I am at the user end and though I actively participate in overhauling of compressors, never been through the manufacturing details.
York and Mcquay are two good manufacturers. Physically check their machines for good understanding. If you want to learn about refrigeration, a good book is
Principles of Refrigeration by Roy J Dossat
Americal Refrigeration Institute (ARI) has procedures for testing chiller equipment.
I will be happy to help you.
Best Regards,