Thursday, January 11, 2018
By NEIL HARTNELL
Tribune Business Editor
A BAHAMAS-based oil explorer has received "a great endorsement" from independent experts who confirmed its chances of success are at least four times' higher than the industry average.
Simon Potter, Bahamas Petroleum Company's (BPC) chief executive, told Tribune Business that confirmation of the validity of its underwater seismic data "can only be positive" for its joint venture partner search.
The exploration outfit, whose licence gives it until April 2018 to spud its first exploratory well in waters south-west of Andros, hired Moyes & Co, a petroleum industry consultancy, in August 2017 to assess its prospects of striking 'black gold' in Bahamian waters.The independent analysis, just unveiled by BPC, calculated the company's "probability of success" for each of the seabed oil sources it is targeting as between 25 per cent to 35 per cent.
Mr Potter said this far exceeded the oil industry's typical 5-10 per cent average, with Moyes & Co verifying that the amount of oil economically recoverable from BPC's southern Bahamian licence fields ranges from a mean of 8.3 billion barrels to "an upside" of 28 billion barrels.
The consultants' technical audit of BPC's seismic data, and the company's interpretations of such, also confirmed the oil explorer's belief that the project can be economically viable with a field of just 200 million barrels.
"Moyes independently calculated the probability of success (PoS) factors for each of the major reservoirs assessed, the majority of which were calculated in the 25 to 35 per cent range," BPC said of the consultants' findings. "Though a few are risked at 12-15 per cent.
"Applying a recovery factor in the range of 20 per cent to 40 per cent to the Moyes [economically recoverable] volumes would result in an unrisked Estimated Ultimate Recoverable (EUR) in the range of 1.6 billion to 3.3 billion barrels (mean), and up to 11 billion barrels (upside)."
Mr Potter told Tribune Business: "We've always been very excited by the project, and it's very large and of a global scale, but to have independent and technical experts endorse our own numbers is great.
"It's very reassuring for us, and a great endorsement of the technical work we've done and the work we've asked them to do on our behalf. The economic threshold for a commercial development is somewhere below 200 million barrels, when the oil industry is average is 500 million to one billion barrels.
"The audit confirms we can be commercial and viable below 200 million barrels, and the technical experts have endorsed multiple thousands of millions of barrels, not just 200 million."
Mr Potter acknowledged that "the numbers can be eye-watering at times", but also pointed to Moyes & Co's assessment of BPC's drilling success prospects as far higher than the global oil industry's average.
"They also said the probability of success is between 25 per cent and 35 per cent," he told Tribune Business. "That's very good from an oil industry perspective.
"I wouldn't go as far to say it's a 'dead cert', but on a normal basis the probability of geological success is in the 1/10 and 1/20 range. This is 1/4, 1/3."
Mr Potter said BPC's decision to invest $100 million in research, data gathering and seismic testing had paid off in the Moyes & Co evaluation and its enhanced prospects of discovering commercial quantities of recoverable oil within the Bahamas' territorial boundaries.
"It doesn't buy you complete technical certainty," he added, "but it buys you a lot of data and hard work that minimises the technical issues in terms of geology. What is there three to five miles under the sea? You can't see it; you have to interpret it.
"To have independent endorsements of the work we've done is great and very reassuring. What we obviously want is a commercial success, and with such large structures the chances of a commercial success are hugely uplifted."
The Moyes & Co findings effectively provide a timely credibility boost for BPC as it continues its search for a joint venture (farm-in) partner to share the technical and financial burden of digging a first Bahamian exploratory well.
"It can only be positive," Mr Potter added of the findings' impact on the joint venture partner search. "It's very encouraging all-around and can only be good for the project.
"Obviously these large oil industry companies will do their own work, and form their own independent opinions. There were other aspects of the announcement about the extent of technical work being done that provide encouragement to potential farminees.
"The oil price has strengthened, but it's still a very tough capital market out there, and companies are finding it tough to get dollars for exploration purposes."
With the April 2018 deadline to drill a first exploratory well near the Cuban maritime border fast approaching, and BPC's search for a joint venture partner continuing, it is highly likely that the oil explorer will have to seek a licence extension similar to the 12 months it obtained from the former Christie administration.
While environmental activists and others are opposed to oil exploration in Bahamian waters, due to the potentially negative impacts on the environment, tourism and economy should a spill occur, the potential benefits for a Government struggling with a near-$7.5 billion national debt are likely to be too strong to ignore.
The former government passed into law a regulatory framework to govern oil exploration, as well as creating a sovereign wealth fund to handle any royalties and other proceeds from its discovery. It also shelved any referendum on whether to permit oil drilling in Bahamian waters until after there was confirmation that such deposits exist.
Mr Potter told Tribune Business that BPC's project has "been a long time coming", and expressed optimism that the company will secure the joint venture partner critical to enabling it to begin exploratory oil drilling.
"I'm always very confident," he said. "We're doing a lot of work with a number of third parties, and it's progressing well.
"I'm very much focused on the project and making that a success, and going ahead with it in a responsible and safe way. It's been a long time coming. I've been with this project since 2005, and certainly the amount of work that has been done during my period of command as well as others has been of the highest quality."
BPC added that with $2.6 million in total cash reserves on its balance sheet at end-November 2017 it had sufficient financing "to continue normal operations through 2018".
The company could have faced significantly increased competition in the oil exploration stakes, after the Trump administration announced plans to expand offshore oil drilling throughout the US coastline. However, Florida has been exempted from this after push back by its governor, Rick Scott.
BPC also has the advantage of a significant, decade-long 'head start'.