Monday, September 10, 2012

...major uncertainties remain concerning oil drilling in The Bahamas

IMF: Bahamas faces ‘not just an oil find’

By Jeffrey Todd
Guardian Business Editor

The International Monetary Fund (IMF) says the size of any oil deposit lurking beneath Bahamian waters is essential to any decision on whether to commence commercial drilling.

Gene Leon, mission chief to The Bahamas, felt there were myriad factors and concerns for this potentially billion-dollar question. How much is there, and how long the benefit will last, must be taken into account and weighed against the possibility of any detrimental impact on the country's coveted natural environment.

"There are clearly environmental concerns, and the flip side to an oil find is the tourism industry," he explained. "You don't want to be marred should a problem arise. There is always the question of how much, how long the benefit lasts, how to use those resources, and how to mitigate any environmental issues. These are big issues, and one must look at it in a holistic way. This is not just an oil find."

The comments by the IMF mission chief came at last week's conference in Trinidad and Tobago concerning rising Caribbean debt and limited prospects for growth. In The Bahamas, oil exploration has been a major revenue option burning a hole in the country's back pocket.

According to a report this summer by the United States Geological Survey (USGS), there is approximately a 50 percent chance it has 1.59 billion barrels of recoverable oil. It further determined there is a five percent chance it has 4.3 billion barrels, and a 95 percent chance of at least 554 million barrels.

Even if the find is on the lower end, the IMF mission chief noted that The Bahamas could consider using the resources just for “self sufficiency". Leon told Guardian Business that Barbados implemented a similar approach.

"It would certainly help. It (oil) is a fairly sizable chunk of your import bill," he added.

Of course, Bahamas Petroleum Company (BPC), along with its shareholders on the London Stock Exchange (LSE), hope any find spills into the billions, rather than millions.

BPC has invested seven figures over the past few years on seismic testing, staffing and expertise ahead of an exploratory drill south of Andros, near the Cuban border.

On the other side, a Russian drilling company is set to drill just 100km from this proposed site later this year.

While that might be  perceived as good news, major uncertainties remain concerning oil drilling in The Bahamas. The previous government suspended BPC's licenses back in May during the throws of the national election.

Guardian Business understands a statement is expected to be released by BPC today, however, indicating that the government will find them in full compliance. If so, that could mean renewed confidence for investors.

This uncertainty has been reflected in the share price of BPC in recent weeks. Trading on Friday saw share price dip below 6 pence per share for the first time since December 2011.

Shares managed to rally at the end of trading, however, finishing off the day at 6.50 pence. That compares with more than 24 pence per share early last year.

Sep 10, 2012