• Activists: Deliver on oil drilling opposition

• Explorer to seek three-year extension

• Commits to spud further well in that time

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Environmentalists yesterday challenged the Minnis administration to make good on its pledge to bar oil drilling after the Bahamas Petroleum Company (BPC) revealed it will seek to renew its four licences.

Activists told Tribune Business they plan “to coerce the government as much as possible” to reject the oil explorer’s bid for a three-year renewal that would commit it to drilling another exploratory well within The Bahamas’ territorial waters during that period.

Besides calling on the prime minister and his Cabinet to live up to their publicly professed opposition to oil exploration, the environmental groups argued it would be inappropriate to approve BPC’s application until their Judicial Review action challenging the permits it received for its first Perseverance One exploratory is ruled upon by the Supreme Court.

Their concerns were sparked after BPC yesterday formally confirmed to the global capital markets that it plans to seek renewal of its four Bahamas exploration licences. Despite Perseverance One failing to strike commercial quantities, the oil explorer signalled that the drilling data obtained - as well as interest from other companies in partnering with it - had given it sufficient confidence to move forward.

“Since the completion of the drilling of Perseverance One, the company has had discussions with industry counterparties in relation to a potential farm-out of its licences in The Bahamas, and is working to formalise an entirely new farm-out process. Consequently, the company intends to renew the four southern licences in The Bahamas into a third, three-year ‘drill or drop’ exploration period,” BPC said.

“The Perseverance No.1 well did not result in a commercial discovery. The company is, however, encouraged that the results from the Perseverance One well indicated the presence of hydrocarbons.” This, together with renewed interest from potential joint venture partners, means BPC is not giving up on or abandoning The Bahamas just yet.

BPC added that its first exploratory well was drilled on a seabed structure that is more than double New Providence’s size, with its licences covering some 3m acres. In effect, Perseverance One represented just one pinprick in a vast area, and the drilling results and data derived from that first well suggest there is the possibility of finding commercial oil quantities nearby.

Suggesting that deeper drilling may be required, BPC’s statement said it was now focused on integrating Perseverance One’s findings with existing data on its licence areas as well as resuming the search for a joint venture (farm-in) partner to share the financial, technical and operational risks associated with drilling another exploratory well in Bahamian waters.

“Given these technical results, since announcing the results of the well the company has had a number of discussions with industry counterparties in relation to a potential farm-out of the licences, and the company is now working to formalise and launch an entirely new farm-out process via Gneiss Energy,” BPC said.

“The farm-out will seek to introduce a funding and operating partner for the next stage of exploration activity in The Bahamas. The company is in the final stages of integrating the well information with its historical dataset and expects to commence the farm-out process upon completing this work in the coming days.

“Concurrent with the farm-out process, the company intends to exercise its right to renew the four southern licences into a third exploration period at the end of the current second exploration period (at the end of June 2021),” BPC continued.

“The third exploration period will last for three years, and will require a further exploration well to be drilled before the period expires, failing which the licences would be forfeited (’drill or drop’).”

As previously revealed by Tribune Business, BPC has to submit its licence renewal applications by March 31, 2021. Yesterday’s statement further indicates that the oil explorer will likely only drill another exploratory well in The Bahamas if it can secure a joint venture partner to help “monetise” its licence assets and provide some return on the $120m it invested in the run-up to Perseverance One.

The Government’s position on BPC’s imminent licence renewal application was unclear last night. Carl Bethel QC, the attorney general, said he was “not aware” of the oil explorer’s intentions and referred this newspaper to Romauld Ferreira, minister of housing and the environment, who has ministerial responsibility for oil exploration and its oversight.

Mr Ferreira did not return Tribune Business phone calls and messages seeking comment before press time last night, so it is uncertain whether BPC has already submitted its renewal applications to the Government. 

And, given that BPC has now fulfilled its existing licence obligations with the drilling of Perseverance One, it is also uncertain whether the Government is still bound by what it previously described as legally watertight agreements to continue honouring the oil explorer’s applications.

Environmental activists yesterday urged Dr Hubert Minnis and his Cabinet ministers to live up to their public opposition to oil drilling. Joe Darville, Save the Bays’ chairman, voiced hope that the Government would stand by its recently-articulated position as he revealed that activists are “struggling” to raise the $200,000 “security for costs” necessary to proceed with their Judicial Review.

“The audacity of this company is beyond imagination,” he said of BPC’s new licence applications. “We have a court case going on right now to find out whether all things were in order for them to explore the first well they did. They have no regard for us. It’s like a slap in the face.”

Save the Bays and Waterkeepers Bahamas were ordered to pay $200,000 by the Supreme Court to cover BPC’s legal costs incurred in opposing their Judicial Review bid, and Mr Darville conceded: “We are struggling. I think we will succeed to come up with the security for costs to continue our court case. That’s the next step we’ll take shortly to make sure they hear our case.”   

Based on the Government’s previous statements, he suggested BPC’s prospects of a licence renewal are “bleak” and expressed optimism that Cabinet ministers will “undoubtedly follow their conscience and public statements and say ‘no’ to any future oil drilling”.

“We’ll advise and coerce as much as possible for the Government not to approve any future drilling,” Mr Darville said. Sam Duncombe, reEarth’s president, said activists had “fully expected” BPC to seek renewal of its existing Bahamas licences.

“We had the Prime Minister and several of his Cabinet ministers saying they were against oil drilling and now there’s another opportunity for them to say: ‘No’. They have an opportunity to say they don’t want this project to move forward,” she added.

“Given there is a court case ongoing, which has not been heard and really needs to be addressed, how can the Government go ahead with any more exploration? Nothing should be renewed until this court case has been resolved. We’re certainly urging the Government to wait until the court case is over.”

Casuarina McKinney-Lambert, the Bahamas Reef Environment Educational Foundation (BREEF) executive director, said it “seems to be a little premature to be thinking about renewal” when not all details regarding Perseverance One’s drilling had been released. She also queried whether BPC had paid previous licence fees that the Government had confirmed were outstanding.

BPC, meanwhile, said Perseverance One drilling costs had increased by $10m above its last $35m estimate. The total bill, now pegged at $45m, soared due to $3m associated with enhanced COVID-19 protocols and a further $7m that was incurred in removing “mechanical debris” from the well.

“The company is still awaiting various final invoices relating to the drilling of Perseverance One, but the total cost of Perseverance One is presently estimated to be approximately $45m,” BPC said.

“Over and above the pre-drill estimated well cost, the company firstly incurred an estimated $3m of additional expenditure on enhanced COVID-19 related processes beyond those which had been planned for prior to commencement of drilling. These processes were put in place to prevent virus infection at the installation, which could have resulted in premature termination of drilling.

“Strict adherence to these company processes, including pre-deployment screening and protocols resulted in the detection of 14 COVID-positive personnel who were denied access to the facility. Enhanced protocols involved chartering planes and additional helicopter transit flights to the budget projections, along with significantly increased accommodation and staffing costs as staff remained quarantined or retained on the drilling vessel for considerably longer than planned,” it added.

“Secondly, a considerable amount of non-productive time (and hence additional cost of approximately $7m) was added to the overall drilling programme as a result of mechanical debris in the hole lost from the managed pressure drilling (MPD) system requiring side-tracking.

“Whilst the majority of Perseverance One costs were incurred and paid prior to and during the course of drilling, work is ongoing to agree the final amounts remaining to be paid with contractors and suppliers arising from the additional unbudgeted costs (including some disputed amounts and some refunds owing), and to finalise a schedule for those payments over the coming months.”