BPC director blasts 'preposterous' action


James Smith


Tribune Business Editor


A Bahamas Petroleum Company (BPC) director yesterday slammed "preposterous" environmental activists for seeking to block this nation from discovering whether it has natural resources to exploit.

James Smith, one of the oil explorer's non-executive directors, emphasised that he was speaking for himself and not the company when he told Tribune Business that the threat of legal action by the Our Islands, Our Future coalition and its allies "doesn't sit well with me".

He argued that with tourism "collapsing, and the economy tanking" as a result of COVID-19, there was "even more reason" to allow BPC to proceed with its exploratory well drilling and determine whether commercial quantities of oil exist that could benefit the Bahamian people.

Saying that he nevertheless "understood" environmental concerns over BPC's plans, the ex-Central Bank governor and finance minister also questioned why the threatened Judicial Review and injunction bid had singled out the explorer rather than all oil-related activities in The Bahamas.

Pointing out that tankers were moving through Bahamian waters every day, and sometimes offloading their cargos at the Buckeye (former BORCO) and South Riding Point terminals in Grand Bahama, as well as at Bahamas Power & Light's (BPL) facilities, Mr Smith argued that these activities presented a greater risk of a spill than BPC's exploratory, non-production Perseverance One well.

BPC and its chief executive, Simon Potter, did not respond to requests for comment sent via their public relations agency after Our Islands, Our Future and its attorney, Fred Smith QC, unveiled their threatened legal action accompanied by warnings urging both the Government and oil explorer to "stand down" until the merits of their case are decided.

However, Mr Smith said: "It would be preposterous for any group to sue the Government, private or otherwise, for pursuing a policy of trying to determine if we have natural resources and the extent of it.

"The next step, if they [BPC] find something, is they have to go back to the Government and negotiate over how they exploit it. It's a two-step process. The end of this process is whether they find something or not. It's an exploratory well.

"They have to go back to the Government if they find reserves estimated at so and so, and a new round of negotiations begins between the Government and the company for the right to produce. That could take any number of forms. The Government might reduce the acreage and keep some for itself, or take a checker board approach where they take the red and the company the black," he added.

"I understand the environmental concerns. I'm not an expert, but when you have oil wells around the world in the Gulf of Mexico, Persian Gulf, UK, US and Russia, and through Latin America, Venezuela, Guyana and Suriname, and you're saying The Bahamas doesn't have the right to determine whether they have natural resources and commercially viable natural resources?

"To find out, at a time when the main industry is collapsing and the economy is tanking, should be even more reason to find out whether there are other valuable commodities or activities to address the downturn."

Mr Smith echoed the policy of the last Christie administration, which was to allow BPC to explore for oil and determine whether there were sufficient commercial quantities that could be extracted, before taking the issue to a referendum where the Bahamian people would decide whether to allow commercial production.

"Any sovereign government has the right to determine what is there, and if they're talking about going to the courts to say an elected government should be stopped from finding out if they have natural resources that are commercially viable, that doesn't sit well with me," he told Tribune Business.

Apart from publicly saying it will grant no other oil exploration licences, the Minnis administration's position on the issue has been less clear. It has tended to hide behind its predecessor, saying that it is bound to honour the obligations the Christie government committed to.

It is also unclear whether any oil discovery would trigger a fresh round of talks between the Government and BPC that could increase the royalty rates paid to a sovereign wealth fund on the Bahamian people's behalf.

Mr Potter earlier this week said the existing rates were embedded in both the law and BPC's licence, and gave no indication they would be subject to re-negotiation in the event of commercial success.

BPC’s existing commercial terms with the Government involve a ‘sliding scale’ of royalty fees, with the rates tied to production (the daily volume of oil, measured in per barrel terms) that is extracted from Bahamian waters.

The royalty rates range from a low of 12.5 per cent for 75,000 barrels per day to a peak of 25 per cent for 350,000 barrels per day or more, with a production licence granted for 30 years. Using a hypothetical example of oil priced at $80 per barrel, BPC has said once production costs - which typically make up 50 percent of the per barrel price - are deducted, the remainder will be split 50/50 between itself and the Government.

This would see both parties earn roughly $20 per barrel at the $80 price. Under current global oil prices, which are trading around $40 per barrel, the split would seemingly be $10 a piece - if oil is found.

Mr Potter has also indicated that BPC is not deterred by the present relatively low global oil prices given that it will be some years before production starts in the event of a discovery. This means that any decision on oil production, if reserves are below the Bahamian seabed, will fall to the next administration.

Mr Smith, meanwhile, said it was "somewhat curious" that environmental activists were not complaining about what he argued was the greater risk of an oil spill occurring from the multiple tankers passing through Bahamian waters daily.

"The horse is already out of the gate in terms of The Bahamas being a transshipment centre," he added. "If you are really concerned about it, you should spread your wings and go after everything that could result in a potential oil spill rather than selectively going after an exploration company."