By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas “cannot afford” to ignore commercial oil discoveries within its territory, an ex-Central Bank governor argued yesterday, while pleading for far greater government transparency on the issue.

Julian Francis, describing oil exploration as “a two-edged sword”, said he both understood and “identified” with opponents of Bahamas Petroleum Company’s (BPC) recent exploratory drilling activities due to fears about the risk it poses to an ocean environment that sustains much of the country’s existing economy.

However, he told Tribune Business that the economic and fiscal devastation inflicted by COVID-19 meant The Bahamas cannot “deprive itself” of a potential multi-million dollar revenue windfall that could benefit the Public Treasury and Bahamian people alike.

The former governor also suggested that successive administrations had stored up trouble for themselves by being less than fully transparent about the process involved in issuing BPC’s licences, their commercial terms and subsequent environmental and other approvals granted to facilitate its Perseverance One exploratory well.

While BPC last week announced that it has abandoned and plugged that well, after failing to strike commercial quantities of oil, Mr Francis said the “starting point” for improved public disclosure surrounding future exploration activities must start if the company seeks to renew the give licences that are due to expire at end-2021.

“This is a two-edged sword,” Mr Francis said, when asked whether BPC’s dry well was a good or bad outcome for The Bahamas. “I truly sympathise and understand the environmentalists. I think that they’re right; we’ve got to protect our natural environment. That’s very important.

“But one has to admit that our options, at this stage in the game, are really quite limited. I have to say if we discover large economically exploitable resources, it would potentially change the position of The Bahamas dramatically. We cannot be completely oblivious to that fact.”

Describing himself as “really divided” on the oil exploration issue, Mr Francis added: “All steps need to be taken to provide the maximum protection to the environment but, at the end of the day, I will tell you that if we find very significant resources there that can be exploited for the benefit of the Bahamian people, I would side with figuring out how to do that.

“I don’t think my position would be: ‘There’s no possibility. Shut it down, we’re not going to do it’. We cannot afford not to do it...... If we were to find resources in The Bahamas, I would not personally be opposed to the exploitation of those resources provided it is done in a safe and proper way.

“The Bahamas is not in a position to completely deprive itself of the benefits of significant petroleum reserves. I don’t think we are. I honestly salute the environmentalists who are trying to protect our environment. I believe in and identify with that,” the former Central Bank governor added.

“But, at the end of the day, I’m not willing to say we’ve got billions of dollars of reserves and cannot touch them. I wouldn’t go that far at all.” The Judicial Review challenging BPC’s permits and approvals has its roots in the alleged lack of transparency surrounding the government processes by which they were granted, and Mr Francis agreed that such a case could be made.

“I have a difficulty with the lack of transparency which surrounds the agreements relating to BPC,” he told Tribune Business. “I really believe that this is such an important issue that the Government of The Bahamas really does have to be entirely transparent about what agreements are reached with investors wish to participate, and wish to explore.

“If we find resources here, one has to have a transparent framework within which exploitation of those resources can happen.” Mr Francis said it was impossible to determine whether the Government had obtained the “best possible deal” with BPC prior to the drilling of Perseverance One simply due to the lack of information provided, although details revealed so far strongly suggest it had not.

“There does need to be complete transparency,” he added. “I don’t think we had that with the previous government. I’m not saying it’s not a good deal. I don’t know, of course, but the fact is the Bahamian people have a right to know and the process needs to be transparent right from the beginning. The environmentalists need to be head...

“I feel very strongly that the Government has exposed itself to criticism that it may be doing things behind the backs of the Bahamian people, and striking deals that people don’t understand. They probably have exposed themselves to that criticism.

“We have to ensure total clarity, transparency and consultation across The Bahamas on how it’s done, and I don’t believe that was the case with BPC. That’s why our environmental colleagues have been given a fairly important podium from which to speak. A lot of people would like to know what the hell is going on.”

Mr Francis also voiced concern about The Bahamas’ ability to properly manage any royalties earnings from commercial oil discovery, suggesting that few developing countries had achieved this although Norway was one example to possibly emulate.

“Even the idea of exploitation needs to be put out to tender. How do you go about licensing parties that wish to explore for petroleum resources. I really honestly do not know exactly how these licences were granted to BPC in the first place,” he added.

“Qualify the parties licensed to do it, have a very thorough framework in which exploration is done, and once you’ve found reserves go into the second phase of how it’s managed. I’m not so sure we’ve done a thorough job in putting in place a mechanism to manage that.”

This, Mr Francis said, would involve determining how royalties from any successful commercial oil production would be split between the Public Treasury and the sovereign wealth fund.