Bahamas ‘open for business’ on oil exploration

The Government was yesterday praised for sending “a signal that the Bahamas is open for business” by moving to bring the oil exploration regulatory regime into law, a move that will facilitate well drilling in 2017.

Simon Potter, the Bahamas Petroleum Company’s (BPC) chief executive, told Tribune Business that the second House of Assembly reading for the Petroleum Bill and accompanying regulatory package represented “one step on the road” towards spudding its first well.

He reaffirmed that restarting the Bills’ passage through the legislative pipeline would give potential joint venture (‘farm in’) partners for BPC’s first exploratory well greater clarity and certainty regarding the investment climate they will face, improving the company’s ability to close a deal.

And the Christie administration’s move will also ease the concerns of BPC’s shareholders, some of whom have complained to Tribune Business in recent months about the Government’s seeming inaction on moving the legislation forward.

Speaking after the Bills and accompanying regulations were reintroduced to the House yesterday morning, Mr Potter said BPC’s shareholders and potential well partners would view the move as “reaffirmation” of the Government’s position to facilitate oil exploration activities in Bahamian waters.

“We see this as very positive for the Government and for ourselves,” the BPC chief executive told Tribune Business. “It’s more of a signal that the Bahamas is open for business.

“It’s the sort of backdrop we need to engage capital and help attract it.”

Mr Potter said “a modern framework for investment” was invaluable to BPC’s efforts to attract a joint venture partner for its first exploratory well, which is required by April 2017 under its licence terms with the Government.

BPC has estimated that the first well will involve a $60-$100 million total investment, with yesterday’s legislative move set to further ease any concerns potential ‘farm in’ partners may have over the Bahamas’ business environment.

“Any investor doesn’t like uncertainty, so the fact these regulations are in the public domain, and the Government has clearly signalled the basis on which exploration will be conducted, is obviously good,” Mr Potter told Tribune Business.

“No potential investor likes uncertainty. You can never remove all technical uncertainty from the geology and sub-surface, but to take away some of the ‘above ground’ issues is nothing but helpful.”

With the Government moving on what it needs to do, BPC’s first exploratory well now depends on it finding a joint venture partner, the necessary financing and selecting the design/location of the well.

“This is one step on the road,” Mr Potter told Tribune Business of yesterday’s activity by the Government. “The important thing is to get this partner on board, and then we will know what’s down there for certain once we get this well drilled.”

The BPC chief previously told this newspaper in a November 2015 interview that the search for a joint venture partner was “taking longer than we would have hoped”, having also been hurt by the steep decline in global oil prices.

The legislative package’s second reading removes one potential obstacle, and also eases the fears of BPC shareholders, who had become concerned over seeming “foot dragging” by the Bahamian government.

David Lawson, a UK-based BPC shareholder, told this newspaper in November that the legislative delay was also exacerbating BPC’s ‘cash burn’ rate and depressing its share price.

Mr Lawson, in his missive to Tribune Business, asked: “Why it is taking so long to bring the new regulations to the House to be passed into law, enabling BPC company to search for a suitable farm-in partner and to explore by drilling one, maybe two exploration wells which, if successful, could transform the finances of the Bahamas, eradicating national debt and raising the living standards of the people of the Bahamas?”

Mr Lawson described oil exploration as a game changer for the Bahamas’ economy” - something this nation requires urgently.

The Government brought the required legislative package to the House of Assembly for its first reading earlier this year, only to cut the debate on the Bills short because Opposition MPs complained they had not been presented with a revised Petroleum Bill draft containing 12 changes to the original.

The Petroleum Bill is the key piece of legislation, as it establishes the legal basis for oil exploration in Bahamian waters, plus a regulatory framework that will govern the wider oil/energy industry.

Mr Potter yesterday emphasised that the legislation and accompanying regulations “apply to the whole industry”, and would benefit companies other than BPC, including rival exploration firms.

“It’s across the board,” he told Tribune Business. “We’re one player in all of this, and to the extent there are other companies who believe there are prospects elsewhere in the Bahamas, it should encourage them.”

Mr Potter confirmed that BPC had spent $100 million on seismic testing and assessing previous wells drilled in Bahamian waters, building up a comprehensive database for potential joint venture partners to assess.

While the dramatic plunge in global oil prices had dampened interest, Mr Potter said BPC’s ‘scarcity value’ - it was one of the few prospects with potentially large quantities of oil - would help offset this.

“They gravitate to large opportunities, the sort of projects that can move the dial,” he explained of oil industry players.

“The potential of the structures we’ve identified in the southern Bahamas is huge. When I say ‘good and bad’, there’s less capital available but it is differentiated based on a smaller number of projects that are very large.”

Mr Potter said the modernised, upgraded regulatory regime would benefit the Government and Bahamian people, as well as BPC, by ensuring environmental and health and safety requirements that met global best practices and standards.

BPC has predicted that its exploration activities could ‘break even’ with the global oil price as low as $30-$40 per barrel, and an oil field of just 200 million barrels - small by global standards.

Comments

B_I_D___ says...

...just hang my head in shame...

Posted 17 December 2015, 7:41 a.m. Suggest removal

sealice says...

this could qualify as the precursor to the dumbest most destructive thing the PLP has ever done. Kiss tourism and fishing goodbye if/when this happens

Posted 17 December 2015, 9:27 a.m. Suggest removal

watcher says...

This feckless government continues to shame us and play loose with our children's resources. Soon we will be one oil spill away from not only losing all our tourism, but we won't even be able to go back to being a fishing village

Posted 17 December 2015, 9:41 a.m. Suggest removal

islandboy says...

Guess all of you guys above me are either A. Gainfully employed or B. Save the Bays Saints who believe that the "environment" is the only thing that matters. With Billions of barrels of oil being shipped through Bahamian waters annually we are already "at risk" for an oil spill and have been "at risk" for decades. We have been "one oil spill away" for much of our modern history and to date we have had no catastrophic incidents despite thousands of tankers moving through the Bahamas over the years. Should we bar them from our shipping lanes? How would the international community react if we did. Also we have drilling programs that are planned to take place immediately adjacent to our maritime border with Cuba that further puts us "at risk". Do you think our politicians have enough savvy to convince the Cuban Regime to not allow foreign companies to lease blocks in their waters just because it may pollute ours? Last time I checked the ocean is continuous and any spill on their side would also be coming our way. The risks are there my friends whether we chose to acknowledge them or not. The structures that have been identified 150 miles south of Andros are enormous and the seismic indicates that these reservoirs contain Billions of barrels of oil. The implications of a find would be transformative to our economy. The fact that both the former FNM and current PLP administrations who have both worked to develop the new Bill and regulations have had the insight to also include a sovereign wealth fund to preserve revenues from petroleum for future generations should also be commended. At GDP growth of a trickle over 1 percent for the last decade were not doing to hot right now. Our unemployment rate is officially 15% but we all know that it is probably much higher than that. Oil is transformative to economies. This can either be good or bad. Countries like Norway have used it for good, they rank in the top three countries with highest GDP per capita in the world (higher than the US even) and have a sovereign wealth fund that is north of 800 Billion dollars (yes you read that right that is $800,000,000,000). The new legislative regime if passed into law limits the government (whether PLP or FNM) from using more than 5% of the revenue from petroleum to fund any of its annual budgets. This limitation should ensure that the remaining 95% is invested (by our central bank) in global stock markets so that there is a return that allows the fund to grow on a yearly basis and not be depleted.

Posted 17 December 2015, 7:26 p.m. Suggest removal

islandboy says...

We are also overstating the chances that there will be an accident. Everytime you get into an airplane there is a chance that you will not make it to your destination. We all acknowledge that. Does that mean we should shut down the entire airline industry because of this? Of course not. There are hundreds of oil wells that are drilled each year. When was the last time you heard of a major oil spill? one in 2010? How many major plane crashes have we had this year 3 or 4? When you look at the number of wells that are drilled and the number of major spills that occur, the probability is very low that you would have a spill that would completely decimate our country. Someone spoke of Tourism, it being our main source of revenue and that is correct. Is this risk free also? Nope. We are only one ISIS extremist away from completely destroying that industry as well. If one of these guys were to slip through our iron clad airport security (tongue in cheek) and gain entry into the country and decided to check into Atlantis and start the new year's fireworks show early, what do you think would happen to our Country? There would be no more tourist coming here after that I can guarantee. We need a second industry that is based on Natural resources. We have only two horses in the race (tourism and financial services) and both of them can be sent to the knackers quite easily im my opinion. Bahamians wake up!!!!

Posted 17 December 2015, 7:26 p.m. Suggest removal

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