Since the Bahamian government’s recent announcement that exploratory oil drilling would be allowed prior to a referendum on the issue ...controversy has erupted along several fronts

The great oil debate

To drill or not to drill is the question

BY JUAN McCARTNEY
Guardian Senior Reporter
juan@nasguard.com

If Bahamas Petroleum Company’s (BPC) calculations are correct, there is a super-giant oil field lying beneath Bahamian waters.

All that needs to be done to get the nearly nine billion barrels of oil it believes is likely there, is to figure out exactly where it is, and go get it without spilling a single drop in the ocean.

If only life were that simple.

Since the government’s recent announcement that exploratory oil drilling would be allowed prior to a referendum on the issue, controversy has erupted along several fronts.

The referendum issue

Perhaps having had its reputation savaged in the gambling referendum in January, the Progressive Liberal Party (PLP) had no wish to risk another fiasco and so opted to take a different route – see if any significant amount of oil is there, and then see how the Bahamian people feel about taking it out of the ground.

BPC maintains it will spud an exploratory well around this time next year, and the government says it will hold a referendum on the actual extraction of any oil in the latter part of 2015.

Yes, the PLP backtracked on its original promise, but is this not a considered, logical position to take in light of the fact that Russian companies are drilling for oil just miles away from our border with Cuba?

Not really, says Free National Movement Chairman Darron Cash.

In fact, Cash contends, it all seems a bit rushed.

“Given the national and international attention that the government knew this matter would receive, the minister of the environment (Ken Dorsett) should not have announced the government’s policy reversal until the proposed legislative changes and the regulatory framework could be disclosed at the same time. It is not constructive to the process that the debate has begun in earnest but there is an information vacuum,” he said last week.

“There is no information packet available, no statement of Government principles, no answers to frequently asked or anticipated questions, no secretariat and no readily available environmental impact studies.”

Cash, who may or may not be familiar with the Internet, is wrong that no environmental impact assessment has been made public.

It’s been out for a year, and the Bahamas Environment, Science and Technology (BEST) Commission has it on the front page of its website.

It’s over 400 pages long and extraordinarily detailed, but more about that later.

Cash is right however, about the lack of regulations and legislation being in place.

According to a letter BEST wrote to BPC Environmental Scientist Roberta Quant on February 15, 2012, there are no specific standards for gas and oil exploration in The Bahamas.

BEST deferred establishing those standards until widespread national consultation and a required regulatory review takes place.

Last week, Dorsett said new regulations to support oil exploration "are substantially complete" and will soon be presented to Cabinet.

It is expected that they would be tabled and debated in Parliament before ultimately going into effect before BPC begins its exploration.

That would be quite a step beyond where the Christie administration was willing to go with regard to the gambling referendum.

In the run-up to that debacle, Bahamians were simply expected to trust the government and the numbers houses’ good intentions with little detail.

Hopefully, Cabinet won’t make that mistake again.

Show me the money

Possibly years away from seeing any oil, Bahamians last week flooded talk shows and social media with the concern that somehow The Bahamas was getting the short end of the stick with regard to oil royalties.

That depends on how you look at it. According to the proposed production license, the royalties paid to the government increase on a sliding scale.

If up to 75,000 barrels of oil are produced per day (bopd), then the royalty rate would be 12.5 percent.

For oil production over 75,000 up to 150,000 bopd, the royalty rate would be 15 percent.

For oil production over 150,000 bopd up to 250,000 bopd, the royalty rate would be 17.5 percent.

For oil production over 250,000 bopd up to 350,000 bopd, the royalty rate would be 20 percent.

For oil production in excess of 350,000 bopd, the royalty rate would be 25 percent.

The royalty rate on any amount of gas production would be 12.5 percent.

BPC has five licenses that cover an area of nearly four million acres in total.

It is also required to pay the government $0.92 per acre per year for its leases.

However, these payments are deductible from royalty payments.

BPC is also surely ecstatic that there is no corporate income tax in The Bahamas.

It is unclear how value added tax would impact oil drilling and or production.

The company has invested nearly $50 million so far; mostly in seismic research.

It says an exploratory drill would cost another $120 million.

It is unclear what The Bahamas has invested so far, but preliminary indicators suggest that the country has spent nothing on BPC’s venture.

That seems like a pretty good return on investment.

However, when you look at what other countries rake in in pre-tax oil revenues, what is proposed would pretty much make The Bahamas the lowest recipient outside of Ireland.

Environmental concerns

The thing most people seemed to be concerned about is an oil spill.

BPC’s research indicates that an oil spill taking place at the location where drilling will most likely take place would have “a major impact on the Cuban coastlines in the vicinity of the release point”.

“Particular wind conditions may allow for transport of small quantities of oil to the west, where it can eventually be advected by the Florida current and potentially affect the Florida or eastern U.S. coasts, or the Western Bahama Islands.

“In case of a seabed spill, it is expected that some oil will surface at a distance from the initial spill due to intense deep dynamics along the Great Bahama Bank. This would favor a wide spread of oil, with possible impact further on the Cuban coast, but also on the Florida or Eastern U.S. coasts, or the Western Bahama Islands.”

BPC’s political ties

Though the PLP tries to downplay it, there is no getting around the fact that Prime Minister Perry Christie, Deputy Prime Minister Philip Brave Davis and Senator Jerome Gomez were all closely linked to BPC prior to the general election.

Davis was its lawyer, Christie a consultant and Gomez the resident director.

All three men have since said they no longer have ties to the company.

But that hasn’t stopped the FNM from asking serious questions.

The Opposition has asked for full disclosure. Davis has expressed annoyance at the line of questioning and pledged to act in the best interest of the Bahamian people.

Gomez addressed the issue last week, though both men stopped short of full disclosure.

Christie said he will address the matter in the House of Assembly today.

Whether there is oil underneath the sea remains to be seen, but what seems clear is that the great oil debate is just getting started.

March 18, 2013

thenassauguardian

Caribbean Blog International

The Opposition Free National Movement (FNM) has vowed to do everything in its power to block exploratory oil drilling in The Bahamas ...before comprehensive regulations are put in place ...and unless there is full disclosure of any relationship between the oil industry and senior Progressive Liberal Party (PLP) members

Opposition Calls For Full Disclosure On Plp Links To Oil

Tribune 242

 
THE Opposition has vowed to do everything in its power to block exploratory oil drilling in the Bahamas before comprehensive regulations are put in place and unless there is full disclosure of any relationship between the oil industry and senior PLPs.


And, with the government’s “rush to drill” – despite its own pre-election promises – FNM chairman Darron Cash claimed there were also worries the government was simply delivering a ‘favour to a financial backer’.

He said in a press release: “The FNM will use every means at its disposal to ensure that the first drill does not penetrate the sea bed until the appropriate legislative and regulatory frameworks are in place and until the Christie administration officials make full disclosure to the people.”

He said Prime Minister Perry Christie and Deputy Prime Minister Philip Davis both delivered services to the Bahamas Petroleum Company before they came to office, while a PLP candidate was the company’s local manager.

“Full disclosure must begin with Senator Jerome Gomez, former country manager for BPC, Deputy Prime Minister Philip ‘Brave’ Davis and Prime Minister Perry Christie, attorney and consultant, respectively,” Mr Cash said.

“Before these senior public officials vote on any issue regarding oil drilling, they must disclose to the Bahamian people everything related to their dealings with any oil or related company that requires approvals from the government to do business in the Bahamas.”

He said these men must disclose:

• terms and conditions of any contracts they had with oil companies

• how much they, their firms and other related parties were paid

• the duration of their contractual relationships

Prime Minister Perry Christie “seems incapable of designing and implementing public policy in a well thought-out and co-ordinated manner,” said Cash.

“The government has announced its intention to allow exploratory oil drilling ahead of putting in place the legislative and regulatory framework necessary to ensure transparency, safety and appropriate returns to the Bahamian people,” he added.

“The Minister of the Environment has given assurances that these are coming. But we must ask, why the rush?”

The move is reminiscent of the government’s “failed attempt to get approval from the Bahamian people” for web shop gaming.

Mr Cash said: “The government was rejected in that effort because of its failure to put in place the necessary legislative and regulatory framework to ensure accountability and transparency. History appears to be repeating itself. With oil drilling the stakes of incompetence in the Christie government are higher.

“While shortcomings in the web shop business may lead to reduced government tax revenues, lack of oversight and proper enforcement in the oil drilling business would be far more catastrophic, possibly leading to significant destruction of our fishing and tourism industries.”

Mr Cash added: “Prime Minister Christie would be aware from the General Election campaign that this is an issue of tremendous concern to the Bahamian people. In view of that, the FNM would have expected a well-considered and well-structured approach from the very beginning. As of now, the government’s haphazard approach has been enormously disappointing.”

Given the national and international attention that the government knew this matter would receive, he said, the Minister of the Environment should not have announced the government’s policy reversal until the proposed legislative changes and the regulatory framework could be disclosed at the same time.

“It is not constructive to the process that the debate has begun in earnest but there is an information vacuum,” Mr Cash said.

In addition to the government’s failure to present details of the legislative and regulatory framework, he said, there was no evidence that the structure to manage this public discussion had been set up within the Ministry of the Environment, he claimed.

There is no information packet available, no statement of government principles, no answers to frequently asked or anticipated questions, no secretariat and no readily available environmental impact studies, the FNM chairman said.

“For a debate of critical national importance that requires a wealth of information, the process is getting started in a completely backwards fashion. This could have been avoided.

“This begs the question – Why the rush? Again!

“In the interest of complete transparency, the Bahamian people deserve to know whether this action by the government is another act of payback to a financial backer of the PLP?

“While we are at the start of this process, the FNM wants the Christie administration to understand that the official opposition will not be a meaningful partner in this important national debate unless and until the members of the Christie administration with past and present ties to oil interests make complete and accurate disclosures of their past financial and other dealings with the principals of BPC and any related party or entity. This disclosure is non-negotiable.”

The FNM urged the Prime Minister to be “very proactive” in managing any public discussion on the issue of oil drilling.

“He would be well advised to outline a clear plan of action and an information/education campaign so that all stakeholders can be informed and then plan appropriately to have their voices heard on this important issue.

“The Prime Minister, as head of the government owes the Bahamian people this elevated level of transparency.”

Tribune 242

Caribbean Blog International

Kenred Dorsett, the minister of the environment and housing - said that he could not confirm a date for the oil drilling referendum ...as Prime Minister Perry Christie has yet to make a formal decision on the matter

Dorsett: No timetable for oil referendum

Minister committed, however, to building political consensus prior to vote



BY JEFFREY TODD
Guardian Business Editor
jeffrey@nasguard.com




The government has no specific timeline for an oil drilling referendum, according to the Ministry of the Environment.

With the country still buzzing from this week's gambling referendum, many Bahamians are wondering when oil exploration will once again be placed on the radar.

Kenred Dorsett, the minister of the environment and housing, said he could not confirm a date for the referendum, as Prime Minister Perry Christie has yet to make a formal decision on the matter.  However, he did note that the government is seeking to develop a more formal consensus on oil exploration before a vote goes to the people.

"I'm not sure if it will be a summer referendum.  I don't know when it will take place," he told Guardian Business yesterday.  "But I do hope there will be a consensus on the issue.  There are members on the other side that who tell me we should be drilling now.  I think, as a minister responsible, I am mandated to ensue there is a current balance, particularly as we look at those efforts."

He added that the government is "getting to the point" where some of the proposed regulations on how to remodel the industry may come to fruition.  After that, he told Guardian Business there would be a "broad discussion" on the issue of drilling in The Bahamas.

The minister's comments come shortly after business leaders expressed hope that the government would approach the oil drilling referendum "differently" than gambling.

While the "Vote No" campaign was victorious last Monday, observers noted that low turnout and general apathy impacted the democratic process.  The government was frequently criticized for being unclear in the referendum questions and failing to introduce specific legislation to back up the possible legalization of gaming.  The vote also became highly politicized, promoting rival parties to endorse opposing views.

"Oil drilling is not a moral or religious issue, it will be a matter of whether you can explain the economic advantages and technical reasons why the environment can be protected," said Richard Coulson, a well-known financial consultant.  "If those points can be explained, there should be no problem."

Peter Turnquest, the minister for East Grand Bahama, urged the government to bring forth legislation in the event of a yes or no vote for oil drilling to build a consensus in the House of Assembly.

After that, the government can embark a "period of education" for the general public.

In regards to public confusion and politicizing of oil drilling, Dorsett told Guardian Business: "I don't want that to happen."

But he stopped short in saying the government would bring forth specific legislation in the House of Assembly.

Guardian Business understands that the issue must be revisited by the prime minister before any decisions can be made on the future of oil drilling in The Bahamas.

February 01, 2013

thenassauguardian

Caribbean Blog International

Senator Jerome Gomez says that he plans to vote yes when the government brings a referendum on whether or not The Bahamas should drill for oil

Senator to vote ‘yes’ on oil drilling referendum

By Travis Cartwright-Carroll
Guardian Staff Reporter
travis@nasguard.com

Progressive Liberal Party (PLP) Senator Jerome Gomez said yesterday that he plans to vote yes when the government brings a referendum on whether or not the country should drill for oil.

Gomez said that on the January 28 gambling referendum he is not sure how he will vote, but he is more than certain how he will vote on the oil referendum.

Gomez said he is “convinced that oil is in The Bahamas, having worked for an oil company in the past”.

He made those remarks during his contribution to the debate on the Constitutional Referendum Amendment Bill.  He voted in favor of the bill.

Before the May 7 general election then Opposition Leader Perry Christie drew headlines when he confirmed that he was a legal consultant for Davis & Co., the law firm that represented the Bahamas Petroleum Company (BPC).

BPC wants government approval to drill an oil well in Bahamian waters by April 2013.

It was former Prime Minister Hubert Ingraham who revealed Christie’s involvement with BPC.

Christie later said that his professional relationship with the law firm was severed “well before” the controversy erupted.

Gomez, who ran in Killarney during the election, was resident manager for BPC according to the company’s website.  He has never publicly commented on that relationship since entering politics.

Dec 07, 2012

thenassauguardian

Caribbean Blog International

NO to oil drilling in Bahamian waters...

Caution needed on the oil drilling issue

Dear Editor,

With the recent announcement that Bahamas Petroleum Company has been granted a three-year license extension, it seems as if this government is moving full steam ahead with plans to facilitate a referendum which, if passed, will allow oil drilling in our waters.

I sincerely hope that if this happens, we will not allow the possible financial gains to cloud our judgment.  When making decisions, the wise thing to do would be to look at the risks versus the rewards.  In this case, I think the risks far outweigh the rewards.

Not so long ago, we witnessed first-hand the worst oil spill in history in the Gulf of Mexico and saw the catastrophic results it has brought on the environment.  Here are some horrifying facts to think about:

1. It is estimated (conservatively) that between 17 and 29 million gallons of oil spilled into the Gulf.

2. The National Wildlife Federation reports that already more than 150 threatened or endangered sea turtles are dead, and 316 sea birds, mostly brown pelicans and northern gannets, have been found dead along the Gulf Coast as a result of the spreading oil.

3. As much as we’d like to forget it, we live in a hurricane zone, and if a storm blows in, the result could be devastating.  The presence of oil could lead to a more powerful hurricane because crude accumulating at the surface could be raising the temperature of the surrounding water.

4. Approximately 70 cents of every dollar we spend is derived from tourism.  If we were to have an oil spill in our waters, this would devastate the tourism industry.

5. The great United States of America with all the technology and resources available to it could not contain this oil spill for months.  Could you imagine what would happen in our case, with little to no resources to deal with this kind of catastrophe?

With this knowledge, it is mind-boggling that any Bahamian government would even consider this undertaking.  I understand that this administration is under tremendous pressure to create jobs, but please don’t allow the greedy oil companies to destroy this country.  Future generations are depending on you, Mr. Prime Minister to make the right call on this one.

 

– Ervin Missick

Sep 12, 2012

thenassauguardian

Caribbean Blog International

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

IMF: Bahamas faces ‘not just an oil find’

By Jeffrey Todd
Guardian Business Editor
jeffrey@nasguard.com

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

thenassauguardian

Caribbean Blog International

Setting the record straight on oil exploration in The Bahamas

Setting the record straight on oil exploration

By Dr. Paul Crevello

Politicizing is common in election years, especially when the initiator is feeling pressure to undermine his opponent.  It is happening in the U.S. presidential race, and it is certainly evident in Bahamian politics.  In this case, in reference to Bahamas Petroleum, what is being stated in the press needs attention.

As former CEO of Bahamas Petroleum, I was present when our licenses were submitted and approved and wish to clarify misconceptions.  I felt it was necessary to step forward and comment on the process BPC went through when applying for the exploration licenses, which was an arduous process with multiple stages of dialogue between the responsible agencies of the government, from the respective ministries, the Cabinet, the attorney general and eventually approval by the governor general.  The process took nearly two years and in the end was awarded under the Progressive Liberal Party (PLP) term in 2007.  But, I wish to point out that the licenses were reviewed immediately upon the Free National Movement (FNM) entering office in May of 2007, and the FNM administration confirmed that the licenses were awarded following established government guidelines set in place by the Petroleum Act.  Therefore, the license application and approval process followed established government procedures, which was a multi-stage approval process that in the end both major political parties reviewed and approved.

What is important is the potential benefit to the country if oil is present and producible, and nothing more leaving politics aside.  There is oil in The Bahamas, but we do not know how much and if there is sufficient pool to be developed.  If so, then the people will be the ones who benefit over the long-term if the process continues to follow legal stipulations of the government and adhere to international safety standards.

Background

Both parties have awarded exploration licences in the past.  In 1983, the law firm of Christie and Ingraham was engaged by Tenneco for approval of drilling a well (drilled in 1986) in the southwest Bahamas.  In October 1999, the FNM awarded exploration licenses to a private “minnow” oil company, Liberty Oil concession, whose owner is a real estate developer, and in 2003, the PLP awarded exploration licenses to the U.S. major oil company Kerr McGee.  The PLP awarded licenses to BPC in 2007 and it became a publically traded company on the London AIM exchange in 2008.  Yes, we engaged Davis and Co. to represent the company and file our license applications.  But they were the only law firm qualified in the oil and gas sector and had experience with Kerr McGee.  So they were and still are the top firm in this field.

It took me several years to convince the Christie regime that there is a probability that commercial pools of oil may be discovered in The Bahamas.  Major oil companies have spent over a hundred million dollars in seismic exploration and drilling five wells in The Bahamas since 1948, all without mishap.  I had commissioned about US$50 million of technical studies, which were recently reported to have a one in two chance of finding four billion barrels of oil.  However, finding it is not the same as being able to get it out of the ground.  It is a complex process and could result in a multi-billion-dollar investment and still many years away from when the first well is drilled.

When the FNM took office in May 2007, I had to gain the confidence of the new administration that The Bahamas may become another Middle East – i.e., net oil producer and exporter.  It took me a couple of years and numerous presentations to convince the new government of this potential, and then it was at that time I introduced the government to the partnership I signed with Statoil of Norway, including audience with Prime Minister Hubert Ingraham.

During the FNM regime, I provided consultation to the Ministry of Foreign Affairs as to the location of the potential oil fields of the southern Bahamas waters, so these areas would be preserved for The Bahamas during negotiations with Cuba on the position of the international border.  I did not want this to be lost in negotiations.

I also suggested that the government initiate dialogue with the respective agencies of Norway, in order to learn how a fishing and lumber-dominated economy went to being one of the wealthiest sovereign funds in the world.  The ministry began dialogue with the government of Norway through political channels on drilling policy and establishment of a sovereign fund.  The FNM government was evaluating the necessary steps required to moving to an oil-producing nation and net exporter if oil was discovered.

Then, BP oil spill in the Gulf of Mexico occurred in April 2010, and rightfully, the government chose to proceed with caution in evaluating the full impact of drilling in The Bahamas, establishing the safeguards to prevent a similar situation from happening in The Bahamas.  The FNM still discussed procedures with the Norway counterparts to strengthen policies for The Bahamas.

Regarding the licenses, Alan Burns, the founder of BPC, first applied for exploration licences in August 2005, following the protocol of the Bahamian Petroleum Act, which was based on UK North Sea regulations.  At the time Burns applied for the exploration licences, the last major entry into The Bahamas exploration was Kerr McGee in 2003, exiting in 2006.

BPCs license applications went through three approval processes; firstly with Minister Leslie Miller of the Ministry of Energy in early 2006.  Then following revisions, provisional approval was granted in late 2006 by the Permanent Secretary Camille Johnson, with final approval signed into effect in early 2007 by Dr. Marcus Bethel, minister of energy and the environment.

The applications then went to Governor General Arthur D. Hanna, whose duty it was to assess the merits and benefits to the country of assigning government lands for exploitation.  As would be expected of a request of such importance, the governor general invested considerable time in reviewing the agreements.  Hanna and the PLP administration (Cabinet and PM Christie) insisted that environmental guidelines and protocol be inserted into the licenses to protect the environment, even though the protocol was not required by the Petroleum Act.  I complied with the insertion because, as an environmentalist, my belief was that we as a company explore with the intention of preserving the environment for future generations.

Upon acceptance of the company’s revisions, the licenses were approved by Hanna, whose authority it was to grant government titles and licensing of Commonwealth lands.  The licenses were signed into effect in April 2007.  This process was not new to the governor general, as he had approved similar applications for Liberty Oil and Kerr McGee.

I ran about eight focus groups with Joan Albury of The Counsellors Ltd. throughout the major cities in The Bahamas, with a general cross section of the population participating.  The majority were in favor of progressing oil exploration after learning about the company and the safeguards it would follow, the potential for discovery of petroleum and the potential benefits to the people and the government.  So in essence, it was received very favorably and these fora were done after the BP Gulf of Mexico oil spill in, I believe, either late 2010 or early 2011.

The landscape

The U.S. government has determined that the BP Macondo spill was by human error.  The oil zones (reservoirs, oil occurs in tiny spaces within rock layers much like water in an aquifer) in the Gulf of Mexico are under very high pressure because of geologic conditions related to burial of soft sand under the Mississippi delta.  In contrast, the reservoirs drilled to date in The Bahamas, south Florida and Cuba are normal unpressured layers because of the hard limestones.  Low pressure in these limestone reservoirs has been established from hundreds of wells drilled in the region.

The last well to be drilled in The Bahamas was in 1986 by Tenneco in the southernmost part of Great Bahama Bank, which was drilled in the shallow part of the bank, closer to Cuba than to Andros island.  Prior to that, four other wells were drilled between 1948 to 1972 in The Bahamas, and none of the wells suffered any mishap: two onshore wells, one on Andros and another on Long Island; and two “offshore” wells drilled in pristine aqua waters of the shallow bank, one just north of Bimini visible from the Great Isaac lighthouse, and another well was drilled in the center of Cay Sal Bank.

And all wells had positive shows of oil and or gas.  The areas were left pristine as before drilling and there was no reported impact on the environment.  A U.S. government report (USGS by Dr. Eugene Shinn) reported on the numerous wells drilled in the Florida Keys and that there was no impact on coral reef environments.

Drilling has been conducted safely and successfully in The Bahamas in the past.  Wells will be drilled on the Cuban side of the boarder, within 10 kilometers or closer to the international boundary with The Bahamas in the coming year.  Oil spill models that I commissioned and recently reported by the company show that if a spill would occur, which would not be a high pressure Macondo-type blowout, then the probability of the spill making landfall on Bahamian beaches is less than a tenth of a percent, nearly zero.

Let government regulations, public fora and the best interest of The Bahamas decide on the potential of the petroleum investment, not politics, rhetoric and ivory tower special interest groups.  I believe once the election is past, the Government of the Commonwealth of The Bahamas owes it to its people to test the potential for oil pools in the south, adjacent to the boundary with Cuba.  Cuba will be testing its side of the border, shouldn’t The Bahamas at least hope that “it could be so lucky”?

• Dr. Paul Crevello is CEO of Discovery Petroleum.  He is also the former CEO of the Bahamas Petroleum Company.

May 11, 2012

thenassauguardian

Caribbean Blog International

Will the Drilling For Oil Issue Decide This 2012 General Election?

Will Drilling For Oil Decide This Election?

tribune242 editorial


 
 
“The approval of drilling for oil in the pristine waters of The Bahamas is among the most momentous decisions that any Government of The Bahamas will ever have to make,” Prime Minister Ingraham told Grand Bahamians at a rally last night.

“This decision by your Government should never be influenced by any financial relationship that exists between the company seeking the permit and its paid consultants and attorneys.

“It is a decision with wide ramifications that will affect the very nature and essence of who we are as a country,” he said.

This is why we were shocked to learn that Opposition Leader Perry Christie is an adviser to the law firm that represents the Bahamas Petroleum Company that expects to receive licences shortly to start drilling for oil in our waters. This is probably one of the most important decisions that the next administration will have to make.

The law firm of Philip “Brave” Davis is listed as BPC’s lawyers with Mr Davis, deputy leader of the PLP, having retained Mr Christie as a BPC adviser.

“If there is an issue they need advice on,” said Mr Christie, “whether or not they need someone to speak to the issue of environmental impact (studies), the issue of whether or not in my judgment a matter is worthy for the government to approve, whether or not an application is ready, whether or not they should employ and who go on the board of directors, whatever views they ask of the firm regards it as necessary, they would consult me on it. Those are the services I provide.”

No matter how much these men might assure Bahamians that the best interests of the country will come first should they become the next government, which one of you would trust such an important decision to them? Wasn’t it Mr Christie who found every excuse in the book to absolve his ministers of their transgressions when they should have been fired? The Greenberg, Quinlan, and Rosner report attributed the PLP loss of the 2007 election to Mr Christie’s perceived weakness and scandal-ridden government.

These are not qualifications for a second chance

April 25, 2012

tribune242

Caribbean Blog International

...the Democratic National Alliance (DNA) has tried to gain political mileage by stirring up a controversy over oil exploration in The Bahamas

Oil drilling in the Bahamas - the facts behind the scares

 

By LARRY SMITH:

 

 

IN RECENT weeks, the Democratic National Alliance has tried to gain political mileage by stirring up a controversy over oil exploration. But rather than focus on the very real substantive issues in a constructive way, they chose to launch a series of personal attacks and conspiracy charges.

In view of the enormous international pressures and revenues that can be expected, together with the dramatic changes to our way of life that are implicit in future oil production, not to mention the incredible pollution risks, it is worth taking a closer look at this issue - particularly in the context of the accusations of cover-ups and carve-ups.

Our original petroleum act was passed in 1945 to facilitate exploration by Gulf Oil, Standard Oil, Superior Oil and Shell. It was replaced by legislation enacted by the Pindling government in 1971, which came into effect seven years later and remains in force today.

The last exploratory well was drilled here in 1986 by a company called Tenneco, and while no commercial production followed from those early explorations, there were oil shows and most experts are convinced that large quantities of petroleum lie beneath our seabed.

The Christie government awarded a British group (later constituted as the Bahamas Petroleum Company) five new exploration licenses for just under four million acres in 2006. The licenses became effective just before the last general election in April 2007, when they were signed by the governor-general. And for the past several years, BPC has been conducting geophysical research in the Bahamas.

Now BPC says it is preparing to conduct appraisal drilling south of Andros, and the DNA thinks this amounts to a conspiracy involving secret deals. The party has set up a Facebook petition on oil exploration, asking Bahamians to sign "If you think we should control our resources to benefit all Bahamians, so we can demand answers before it's too late".

From the commentary it has made, the DNA is clearly not opposed to drilling, but is simply trying to stir the pot. This is not necessarily a bad thing, but it depends on how it is done. Accuracy and honesty are important when making public statements on complex issues. Publishing false statements and facilitating wild allegations will lead to a rapid loss of credibility.

For example, according to the DNA, "this government negotiated a 12.5 per cent (royalty), one of the worst in any country". In fact, it was the Pindling government - back in 1971 - that set a then industry-standard minimum royalty rate of 12.5 per cent "of the selling value at the well-head of the petroleum won and saved from the licensed or leased area".

And, contrary to what the DNA now alleges, the licenses awarded to the Isle of Man-based Bahamas Petroleum Company in 2007, set a sliding scale of 12.5 to 25 per cent of production value, a fact which BPC clearly shows on its website.

Those licenses were never renewed, because the government imposed a moratorium on oil exploration in 2008, while efforts were made to pin down precise maritime boundaries with Cuba, the US and the UK/Turks & Caicos Islands. The boundary with Cuba - where four of the BPC licenses are located - was finalised last October.

In 2010 - following the catastrophic Gulf of Mexico oil spill - the government decided to step back and review the entire petroleum policy framework before allowing exploration to resume. The Ministry of the Environment also required all license holders and new applicants to produce environmental impact assessments for the areas they wished to explore.

There are currently seven approved licenses for oil exploration in Bahamian waters, and 10 applications for new licenses have been submitted since 2008. Five of the approved licenses are held by BPC. The other two are held by Liberty Oil, but were suspended because of the company's failure to remove a sunken vessel from an Abaco reef.

A US company called NPT Oil has applied for seven licenses covering more than six million acres north of Grand Bahama. NPT's Bahamian data and assets were recently acquired by Pennine Petroleum Corporation, an emerging oil and gas exploration and development company active in Alberta and Saskatchewan.

A Canadian geophysicist named Allan Spector has applied for an onshore license near Seymours on north Long Island. And a partnership between BPC and the Norwegian company Statoil has applied for three licenses covering more than 2.3 million acres near the Cay Sal bank.

DNA Montagu candidate Ben Albury - who has led the party's campaign on this issue - says he is simply demanding transparency and information. But he has also accused Environment Minister Earl Deveaux of gross malfeasance, without any evidence, and has succeeded in making the issue more opaque, rather than clearer, for the average Bahamian.

"My main issue," he told me over the weekend, "is the dodging of the questions by Deveaux. If you listen to his comments, he makes it sound as if there is a moratorium on oil exploration, (but) BPC is telling the media that they intend to drill in the coming months."

Albury cites a Miami Herald article published last October, in which Dr Paul Gucwa, BPC's chief operating officer, refers to plans for an exploratory well by the end of this year. "The Bahamian government has a moratorium on granting new exploration licenses," the Herald reported, "but... that could change following the country's May general elections. BPC has contacted 10 major international oil companies about partnering in its oil exploration operations."

A review of Deveaux's statements on this matter over many months, if not years, shows an entirely consistent position. He has repeatedly stated that the exploration freeze will remain in effect until an updated regulatory system has been put in place. He has also said that the present government is committed to the widest possible public consultation on the issue of oil production.

However, if you listen to the talk shows, some Bahamians are already gearing up to stop work and collect their "black gold" dividend cheques, while others are worried about secret backroom deals in which the well-connected carve up the country's seabed for their personal benefit.

Interestingly, there may be some truth to this. As mentioned earlier, experts have believed for decades that large quantities of oil and gas lie beneath the Bahamian seabed, and now that drilling technologies and market prices have reached the point where exploitation is not only feasible but profitable, we can reasonably project a massive influx of petroleum revenues in the near future.

But that is precisely why the government is seeking to overhaul our regulatory, legislative, environmental and financial regimes, in order to lay the groundwork for the orderly development of this industry (whether you like it or not). As Deveaux told me over the weekend: "Without detailing all the issues inherent in something so materially significant, it is a clear responsibility of the government to prepare the country for oil and its likely consequences."

The DNA appears to be confused because, under existing Bahamian law, licensees are required to drill an exploratory well within a certain timeframe - which in BPC's case is prior to April 2013 - or risk forfeiting their rights. The company says it has completed the required environmental impact assessment for this test well and is already working on a management plan.

Meanwhile, Environment Ministry officials have met with their counterparts in Norway to discuss revisions to the existing act and regulations, and consultants have produced working drafts for the government to review, after which they will go to the attorney-general. Deveaux says the proposed regulatory system will be included in his hand-over notes for the next government.

"Our visit to Norway in December was very useful and the government has agreed in principle to use that country's policies as a guide in developing a Bahamian petroleum industry," Deveaux said.

Norway began offshore petroleum production in 1971 and is now the world's seventh largest oil exporter and second largest gas exporter, with some 600 licenses awarded to a variety of companies. Norwegian officials have advised the Bahamas to have all the essential elements of oil and gas governance in place before any drilling begins. These include environmental, safety, tax, revenue, training and employment policies; contingency plans; and insurance requirements.

Norway's national petroleum policy seeks "to ensure long term management of, and value-creation from, the country's petroleum resources". Oil and gas activities are restricted to offshore waters, and all subsea resources are vested in the state, which is charged with managing them for the benefit of Norwegian society as a whole.

As we said, under the current Bahamian act, an exploration license includes an obligation to drill, and a bond must be posted to that effect as a way of precluding speculators. Exploration licenses are awarded for an initial term of three years, renewable for two successive three-year periods, but the 2008 moratorium meant that BPC's original license was put on hold and never technically renewed.

Similarly, if BPC's exploration is successful, current law says it is "entitled" to a renewable 30-year lease to begin commercial production. The royalty rate for production of oil and gas is based on a sliding scale of 12.5 to 25 per cent (from which the lease fee is deducted), with no other taxes or fees required. Equipment can also be imported duty-free.

On its website, BPC says that its license expires on April 26, and it has applied for renewal. The company notes that if it meets its obligations, "the governor-general shall renew the licences for another three years provided the company commits to drill an exploration well and (starts) the well before the end of the first renewal year, ie, by April 26, 2013".

So there is clearly some tension between the positions of the government and BPC, which claims to have invested $50 million so far to explore. Appraisal drilling is projected to cost several hundred million more, and obviously the company expects to benefit from this investment. But the petroleum act was written 40 years ago, and is silent on many of the complex issues the Bahamas would face as an oil producer.

Meanwhile, the DNA has rightly argued that oil drilling threatens two of the country's biggest industries - tourism and fishing. "(We) demand to know if Mr. Deveaux and the FNM government have ensured the protection of Bahamian interests," Ben Albury says. Well, the short answer is that Deveaux has repeatedly talked of the need to train Bahamians to manage a new regulatory environment.

"We have to come to the public with full information," Deveaux told me. "We want a standard of management similar to that of Norway. We need a petroleum directorate that is fully staffed with a range of expertise, including financial. If oil is produced we will be dealing with billions of dollars, changing the whole culture of the country and the way the government deals with money. It is no small thing."

In Norway, for example, surplus oil revenue is deposited in a $600 billion sovereign wealth fund so that the country's non-renewable resources can benefit future generations. The fund is managed by the central bank, under rules developed by the Ministry of Finance, and is responsible to parliament, with the interest used to cover government pension obligations.

Consultants have also advised the Bahamas to increase royalties and adopt profit sharing with oil companies in order to compensate for the absence of a corporate income tax.

As noted earlier, BPC's licenses were awarded by the Christie administration in 2006, and signed by former Governor-General Arthur Hanna in April, 2007. It is noteworthy that PLP candidate Jerome Gomez is the company's resident manager, former PLP cabinet minister Sean McWeeney is its senior counsel, and PLP deputy leader Brave Davis' law firm is the company's onshore legal advisor.

What is even more noteworthy is that the PLP has so far ignored this important public debate. The FNM's position is that "nothing can happen until the government approves and nothing will happen until there is public consultation". The DNA says it will hold a national referendum on oil exploration and production. The PLP is heavily conflicted in this matter and has said nothing.

Did someone mention carve-up and cover-up?

* What do you think? Send comments to larry@tribunemedia.net or visit www.bahamapundit.com.

March 21, 2012

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