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Showing posts with label Bahamas Petroleum Company. Show all posts
Showing posts with label Bahamas Petroleum Company. Show all posts

Wednesday, May 8, 2013

...will The Bahamas government allow Bahamas Petroleum Company (BPC) to drill for oil willy-nilly in Bahamian waters ...and risk the destruction of the Bahamian bread and butter industry - tourism?

Young Man's View: The Oil Industry




By ADRIAN GIBSON
ajbahama@hotmail.com
Nassau, The Bahamas


...

I continue to believe that Bahamas Petroleum Company is a bit player in the oil industry and, having been told of the overly emotional online attacks on me by so-called shareholders/investors after my first column, I am now even more interested in piercing the veil and looking into any and all drilling agreements that this company—and any other company— has with our government.
 
For some reason, every time I think about the giving away of our national patrimony, I hear Beavis and Butthead sarcastically snickering in the background. The licensing agreement between BPC and the government states that the oil royalties would be disbursed on a sliding scale, i.e. if 75,000 barrels of oil are produced daily, the royalty rate would be 12.5 per cent; if it’s in excess of 75,000 and up to 150,000, it would be 15 per cent; 150,000 to 200,000 daily barrels would yield a royalty rate of 17.5 per cent; 250,000 to 350,000 would result in a 20 per cent rate and any daily production in excess of 350,000 barrels would incur a royalty rate of 25 per cent.
 
The Bahamas has no Environmental Protection Act and the trite regulatory practices (Environmental Impact Assessment reports) overseen by groups like the BEST Commission—a toothless bulldog— is laughable at best.
 
I totally agree with a recent article written by attorney Fred Smith (Queen’s Counsel) when he said: “As the Bahamas broadens its industrial investment profile; encourages large scale urban development; promotes all inclusive anchor projects by Bahamians and foreigners and continues its growth and development, it becomes more and more urgent for an independent regulatory body with teeth, to protect our often pristine, and always fragile environment.”
 
He went on to say: “The Bahamas, as a Small Island Nation, must make protecting the environment a priority. It is also important that stakeholders and interested parties who may be affected by industrial and/or other urban developments have an opportunity to be properly consulted. This has been repeatedly affirmed by our Supreme Court, Court of Appeal and Privy Council in the Guana Cay and Abaco Wilson City Power Plant litigation. The BEST Commission has been established for years but it is not a statutory body and needs to be institutionally created by legislation to make it effective and relevant.”
 
Yes, our sluggish, relatively rebounding economy could do with an injection of oil money—but it must be on the best, most nationally-sound terms and not be a hurried, tactless and superficial attempt to redesign our economy overnight. The Nigerian experience should teach us, as a nation, the shortfalls of unregulated drilling, of allowing foreign companies to buy off prominent members of government and of an oil rich country having a poverty stricken population due to corruption, greed and overtly scandalous behaviour.
 
Now, while Bahamians are discussing oil from the perspective of a countrywide get-rich-quick-scheme, many of them haven’t considered the environmental ramifications, how BPC will likely go about getting it and/or a thorough examining of the peripheral issues related to oil drilling.
 
In a published Facebook post forwarded to me by economist and lawyer Dr Gilbert Morris, he said:
 
“Let’s forget about the risk premiums to protect our waters and let’s forget about the relative costs of both drilling and pumping. If there are 3 billion barrels undersea in the Bahamas, what would you think when you learn that the US consumes 19 million barrels per day? This means, if we have 3 billion barrels, our total store of oil is 150 days of US consumption.”
 
He went on: “So therefore, here is what is likely to happen: The lead firm will confirm its find and say to the government we will pay you a royalty. Let’s suppose the royalty is 90% of profits, just to be overly optimistic. The government would never see a dime. Why? Because the firm with the rights in the Bahamas, will sell the rights to the proven reserves to a larger company. That company will determine what it costs to pump the oil from the depths. The government will only gain income, even if its on the gross, from oil that passes the Relief Valve. But nothing will. Because when the large Company buys the rights, they will Cap the Wells immediately. That is because, oil prices would need to be over $200 per barrel to make its economically feasible to pump it. So Caping is like storage until the market price makes pumping feasible.”
 
“A final point: if the oil has a high sulfur content, (Sour), then that adds refining costs too. There are lots of oil finds all over the world. The question is, is it financially feasible to pump it. If the find in the Bahamas was a “monster find” (and it could become that), the question will be the cost of pumping – including environmental protection costs – relative to the profit yield based on the market price over time,” the economist concluded.
 
An October 2012 report in The Economist stated that oil is stolen in Nigeria at a record pace, with the government inflating output figures by using a discombobulating assortment of statistics. According to that report, Nigeria announced that its oil production had increased to 2.7 million barrels per day; however, due to a corrupt culture, that figure is nearly impossible to verify.

According to a former senior World Banker—Oby Ezekwesili (a Nigerian)—some $400 billion of that country’s oil revenue has been squandered or pilfered since 1960. Nigeria, home of the world’s ninth largest gas reserves, also has an unregulated petroleum industry where a Petroleum Industry Bill has been stalled for 15 years. The Bill was drafted with the intent to heighten transparency, proffer a regulatory regime and govern every aspect of the nation’s oil industry. However, glad-handing politicians have managed to bar the formulation of any effective regulatory regime as that would curb their corrupt practices and proscribe deterring—even penal—sanctions. Could there be similar reasons why no such Bill has been considered in the Bahamas—why even Environmental Protection legislation hasn’t been brought to the Parliament?
 
Indeed, a joint report by Transparency International and the Revenue Watch Institute revealed that Nigeria’s government-run National Petroleum Corporation is “accountable to no one” and is a “slush fund for the government,” which makes it the worst of 44 national and foreign companies included in their study. When one thinks of how locally government-run corporations have been mismanaged over the years—e.g. Bahamasair, the Bahamas Electricity Corporation and even the Bahamas Telecommunications Company (before the sale)—there’s much to desire and the thought of our governments running an oil slush fund is a no-no!
 
What’s more, Nigeria’s oil producing delta region has suffered environmental devastation that would eternally damage our pristine environment (beaches, mangroves, etc) and, as it relates to the environs and our tourism industry, set us back into the Ice Ages. Whilst the United Nations have chided the Nigerian government for their unchecked environmental degradation, there has been little to no attempt by that government to take legislative initiatives to curb indiscriminate drilling—just as there has been no attempt by the government of the Bahamas thus far! After a rig explosion (Chevron) in January, 2012, local Nigerian environmental groups have placed a $3 billion price tag on losses accrued over 46 days due to fires, a gas leak and environmental degradation. Even more, in December 2011, an oil spill at one of Royal Dutch Shell’s offshore oil operations was estimated to have cost a record $5 billion in damages. Apparently, the farmlands of Nigeria—particularly in the Niger delta—are progressively being destroyed. It remains to be seen what penalties or compensation will be rendered by both companies to the Nigerian people, considering the predilection of corrupt government officials and the likelihood that it would merely be swept under the rug. The Nigerian response, in these instances, could hardly be compared to the United States response to British Petroleum’s oil spill in the Gulf of Mexico!
 
According to a Green Peace International article titled ‘Shell Shocked’: “We witnessed the slow poisoning of the waters of this country and the destruction of vegetation and agricultural land by oil spills which occur during petroleum operations. But since the inception of the oil industry in Nigeria, more than twenty-five years ago, there has been no concerned and effective effort on the part of the government, let alone the oil operators, to control environmental problems associated with the industry.”
 
A 2010 Newsweek article entitled ‘Oil’s Shame in Africa’ further stated that: “Oil spills in Nigeria are a common occurrence; it has been estimated that between 9 million to 13 million barrels have been spilled since oil drilling started in 1958.”
 
Due to a lack of regulation and political patronage, more than 1000 people lose their lives to oil-related deaths in Nigeria every year, 70 per cent of that nation’s population live below the poverty line (less than $1 dollar per day), clean potable water is hardly accessible and—even whilst it is a major oil exporter having racked up more than $340 billion over the last few decades—Nigeria still imports most of its gasoline. Is it possible that we could be an oil producing nation that exports our crude but then—as is the case with salt—must buy back and import our own oil (in its now refined state)?
 
Considering the corruption, dodgy practices and dysfunction of some of our elected representatives and public officers, should we too be worried about gas price-fixing scams (which cost Nigeria $29 billion in the last 10 years), oil theft (which cost the Nigerian treasury $6 billion per year), fuel subsidy scams (which cost the Nigerians $6.8 billion) and an overall proclivity by some officials to “tief” and misuse public funds like it was going out of style (which has cost the Nigerian’s nearly $400 billion since their Independence in 1960)?

So, will the government allow BPC to drill willy-nilly and risk the destruction of our bread and butter industry (tourism)? Will they risk the contamination of our groundwater and our soil, of the destruction of our coastal environment, of our local fishing industry being ruined by oil spills and of oil sheen spreading to fishing habitats with the government still being handicapped in its capacity to even conduct clean-ups at Clifton Pier (from BEC’s spills)? And, what about gas flaring—which is the release of unusable or unwanted raw natural gas and associated gases—into the atmosphere? Look, if we’re going to drill, let’s do it the right way, let’s put any and all related legislation and regulations in place beforehand. The government must remember that we the people—and those who make up the government—all live in the Bahamas and, unlike some of the principals of BPC, have nowhere else to go and call “home” (in the truest sense of the word).
 
I urge the government to get on with the people’s business, to stop talking foolishness in our Parliament or resign and get the hell out!
 
...
 
May 06, 2013
 
 
 

Saturday, March 23, 2013

...The Bahamas had done an “ass backwards” job in negotiations with the Bahamas Petroleum Company (BPC)... ...the country should receive “no less than 60 per cent” of the proceeds ...if commercial quantities of oil were discovered

Bahamas 'Ass Backwards' Over Oil Negotiations






By NEIL HARTNELL
Tribune Business Editor
Nassau, The Bahamas
 
 
 
A well-known attorney yesterday said the Bahamas had done an “ass backwards” job in negotiations with the Bahamas Petroleum Company (BPC), arguing that the country should receive “no less than 60 per cent” of the proceeds if commercial quantities of oil were discovered.
 
Craig Butler, head of the C. F. Butler & Associates law firm, told Tribune Business that the 12.5-25 per cent ‘sliding scale’ royalties agreement negotiated with BPC was similar to arrangements “Third World” states had reached with oil explorers.
 
Recalling the research he conducted on the matter in the run-up to the May 2012 general election, Mr Butler said most countries had negotiated terms where they received between 25 per cent to 90 per cent of the proceeds from any oil exploration/production.
 
He added that BPC was being “disingenuous” and seeking to recover all its development and exploration costs upfront, the moment commercial oil quantities were found, whereas most such deals allowed exploration firms to recover such costs over the lifetime of their leases.
 
And Mr Butler called for the Bahamas to create a non-political National Commission to re-negotiate the deal with BPC, and introduce more “transparency” into the process.
 
“All the countries that aren’t good at negotiating deals got the thin end of the stick,” Mr Butler said of the findings produced by his research. “The more developed countries tend to take a larger part of the pie in terms of the profits.”
 
Simon Potter, BPC’s chief executive, told Tribune Business yesterday that the financial agreement was effectively a 50/50 split between the company and the Government.
 
Based on oil selling at $80 per barrel, BPC presentations have shown that while half that revenue sum - $40 - would cover costs, with the remaining 50 per cent or $20 each going to the company and the Government respectively.
 
Yet Mr Butler argued: “BPC is being disingenuous, making it seem as if they are taking an amazing risk. They are, but that is what business is all about. They’re looking to recoup their costs right away.”
 
He suggested that typical oil exploration deals allowed companies to indeed recover their costs, but over the lifetime of their lease agreements.
 
Mr Butler said that if BPC’s development costs worked out to be $20 billion, it seemed to want to recover that “off the bat” if commercial oil quantities were found, based on its agreement with the Government.
 
As a result, the Bahamas would not see any benefits for three-four years.
 
“With the greatest respect to these negotiators, we are still enamoured that we possibly have oil, natural gas, and this money is coming in,” Mr Butler said.
 
“We’re looking at it as if the country is benefiting by $10 billion, $20 billion, and we’re salivating. We’re not thinking long-term, thinking this is the Bahamas’ last opportunity to become the first world country it wants to be.”
 
He added that Trinidad & Tobago had also squandered its oil and natural gas inheritance, with the financial terms benefiting the explorers, and proceeds concentrated in the hands of a few.
 
“If this is a national resource, if we are putting our tourism industry at risk, the Bahamas as a whole needs to benefit from this,” Mr Butler told Tribune Business.
 
“My research has shown that generally, the initial financing is paid back over a period of time, 10-20 years at a reasonable interest rate. Profits are then split. Going rates are anywhere from 25 to 90 per cent. Clearly, the better your negotiating team, the better the country’s deal.
 
“In other places, companies pay a large fee to come in and prospect. All the burden is theirs. And their licenses have determinable periods,” he added.
 
“It appears as though in the Bahamas we’re always ass backwards. We should be receiving no less than 60 per cent, and all infrastructural and economic costs should be paid back over 20 years at 3 per cent. Take it or leave it. If it were put that way, they’d [BPC] jump to take it.”
 
Describing 25 per cent and 90 per cent as the respective low and high ‘ends of the scale’ in terms of what sovereign countries received, Mr Butler said the Scandinavian nations received the latter.
 
“Twenty-five per cent tends to be the Third World places like Belize that have no idea how to negotiate a contract,” he added. “Nigeria has 70 per cent. If Nigeria has 70 per cent, why can’t the Bahamas negotiate 60 per cent?”
 
Asked about the way ahead, Mr Butler told Tribune Business: “What I would like to see is a National Commission appointed, not just PLPs but a cross-section of respected people in society, 15-20 of them, who can go in and negotiate these contracts on our behalf.
 
“It’s the only way we can go to have any transparency. It it’s completely political appointees, we’re doomed.”
 
He urged that ‘new faces’ be appointed to this Commission, along with several experts on the international oil industry.
 
March 22, 2013
 
 

Tuesday, November 13, 2012

...the report on the potential for the Bahamas Petroleum Company (BPC) to drill oil in The Bahamas... and the impending referendum question on drilling for oil in The Islands

Oil Referendum Before BEST Report




By Kendea Smith
The Bahama Journal
Nassau, The Bahamas




Before the Bahamas Environment, Science and Technology (BEST) Commission completes its report on the potential for the Bahamas Petroleum Company (BPC) to drill oil in The Bahamas, the government will present an oil referendum to Bahamians, according to Environment Minister Kenred Dorsett.

“That is my understanding,” the minister told the Bahama Journal recently. “It is my understanding that the matter is going to be put to referendum when it comes to drilling but they are licensed and there is an existing renewal framework, which still gives me the ability to have discussions with them regarding the terms of renewal and so those discussions are being had.”

He continued, “Clearly BPC is aware of the policy by the Government of The Bahamas is to proceed to the referendum the question of drilling. They understand that and they have been very cooperative.”

BPC has reportedly met all of its licensing requirements for oil exploration.

However, Minister Dorsett said the company still has some loose ends to tie up.

“There are issues that the Bahamas Environment, Science and Technology Commission have raised with them. The advice that I have been given is that some information that has been forthcoming – some of it not all of it,” he said.

“But we remain in dialogue with BPC in relation to its application for renewal and I think that over the next coming months those discussions will probably be more frequent. But they are in contact with the BEST Commission so I will be awaiting further advice from that body.”

Minister Dorsett said there is currently oil drilling legislation on the books.

However, he said the question is if whether or not the regulatory framework in place for oil drilling is sufficient.

“We’ve had numerous discussions with the director of legal affairs in the Attorney General’s Office regarding the regulatory framework that we hope to advance in relation to oil exploration and drilling and hopefully making some significant changes to the regulatory environment, which I think will not only provide better protection but I think enhance the regulatory generating opportunities for the country as a whole in the event it is something that the people of the Commonwealth of The Bahamas decide on,” he said.

BPC officials say the country can make $30 billion a year if it engages in oil drilling.

Prime Minister Perry Christie has said that an oil drilling referendum will be put to the Bahamian people next year.

13 November, 2012

Jones Bahamas

Saturday, April 28, 2012

Progressive Liberal Party (PLP) Leader Perry Christie backtracked on a statement he made a week ago ...confirming that Bahamas Petroleum Company (BPC) was benefiting from advice he was providing as a consultant for Davis and Co. law firm

Christie backtracks on oil statment


PLP leader contradicts earlier admission on issue


By Taneka Thompson
Guardian Senior Reporter
taneka@nasguard.com


Nassau, The Bahamas


Progressive Liberal Party (PLP) Leader Perry Christie last night backtracked from a statement he made a week ago confirming that Bahamas Petroleum Company (BPC) was benefiting from advice he was providing as a consultant for Davis & Co. law firm.

Christie said in a statement he no longer works as a consultant for the firm. He said the professional relationship was severed “well before” the issue became a controversy.

However, the press release contradicted statements Christie made during a recent telephone interview with The Nassau Guardian that was recorded with his consent.

In that interview, Christie indicated he was still providing advice for BPC, which is seeking approval from the Bahamas government to drill for oil in Bahamian waters.

Last Thursday, Christie said he is a consultant for Davis & Co. and gives legal advice for BPC. He made no mention of the relationship being over — in fact refering to the advice he is ‘now’ giving.

“It’s not a conflict because the advice I’m giving now has nothing to do with any decisions I [will] make as prime minister,” he said.

Davis & Co., the law firm owned by Progressive Liberal Party (PLP) Deputy Leader Philip Davis, is one of two Bahamian firms that represent the oil company.

“Once we became in Opposition, part of the professional services I render is by way of a legal consultancy to Davis & Co,” the PLP leader said last week.

“As a part of the legal consultancy, I consult on work the firm deems I am qualified by the office I’ve had, by the knowledge I have in terms of government and by my own grasp of the legal principles involved in issues to do with governance. So that is my consultancy and that embraces whether [it’s] matters of tourism or in this case, Bahamas Petroleum.”

The revelation that Christie is providing advice for BPC was made by Prime Minister Hubert Ingraham last week, after Ingraham was asked by The Nassau Guardian about the issue of oil drilling.

Christie confirmed he was providing advice through Davis & Co. after he was contacted by The Guardian and questioned on the matter.

During that interview, Christie expanded on the advice he gives to the oil company through Davis & Co.

“If there is an issue they need advice on, if they need someone to speak to the issue of environmental impacts, 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, who should go on the board of directors, whatever views they ask of the firm in the event that the firm regards it as necessary they would consult me on it — those are the services I provide,” Christie said.

Last night, he said his working relationship with Davis & Co. and BPC is over.

“Well before this current controversy, which is motivated solely by Ingraham’s last-minute attempts to derail his impending loss, my consulting arrangement with Davis & Co., which represented BPC among many other clients, had expired.  Thus, I am not currently advising BPC in any manner,” said the statement.

Christie’s admission last week has been the subject of several attacks from Ingraham and the Free National Movement.

On Wednesday night, Ingraham labeled Christie an oil lobbyist and said the PLP leader’s ability to lead the country is now compromised because of his relationship with BPC.

Yesterday, members of the Democratic National Alliance (DNA) demonstrated outside the Office of the Leader of the Opposition on Parliament Street and demanded his resignation over the matter.

Last night, Christie said the criticism was politically motivated and added that his ethics are above reproach.

“They are losing, we are winning, and they are inventing new charges and distractions,” he said.

Christie added that when permits for oil exploration were granted by his administration he ensured that stringent environmental restrictions were imposed.

He said the Ingraham administration did not adhere to the same strict policies when it granted oil exploration licenses.

“The current prime minister had a different approach, issuing oil exploration permits with no serious environmental conditions whatsoever,” Christie said.

Christie also said if the PLP wins the next election oil drilling would only be considered once there is a full regulatory system to ensure that stringent safety and environmental protection systems are in place and after there is a national consensus on the issue.

Christie said his party would put the issue to a national referendum if necessary.

Apr 27, 2012

thenassauguardian

Tuesday, May 24, 2011

“The Bahamas, a giant oil province in the making”

Report reveals potential oil revenue for Bahamas


By STEWART MILLER
NG Business Reporter
thenassauguardian
stewart@nasguard.com


What financial benefit should Bahamians expect to reap if the sands beneath us hold the immense oil treasures some are projecting?

Under the current leasing arrangements, royalties of up to 25 percent of well-head revenue could translate into hundreds of billions over time. But as far as the government’s take goes, the terms of those licenses are quite favorable — for the licensees.

The projection for a small government take relative to other oil-producing countries is playing into the Bahamas Petroleum Company’s (BPC) efforts to attract investors to its Bahamian petroleum exploration project, and was featured in its April 2011 investor presentation, “The Bahamas, a giant oil province in the making”.

“Attractive fiscal terms: Low royalty; no corporation tax,” was the way it read in BPC’s investor presentation. One graph compared how licensee revenues in The Bahamas might stack up against revenue from a royalty-paying federal lease in the United States’ territorial waters in the Gulf of Mexico, based on $90 per barrel oil and 2007 variables. About 33 percent of revenues were allocated to costs in both territories, but with royalties calculated at peak production levels, the Bahamas government would take 25 percent in royalties compared to about 27 percent for the US fields. The US government cut of the lucrative revenue stream does not stop with royalties, however.

US Gulf of Mexico revenue to the licensee was reduced another 25 percent approximately in taxes. In the case of The Bahamas, that would go to the licensee’s net revenue, according to a chart presented. That chart was also a part of BPC’s competent person’s report prepared by the firm Moyes & Co. in 2008 and available on BPC’s website at http://www.bpcplc.com/our-assets/competent-persons-report.

Of the 16 countries used for another chart in BPC’s investor report, the “government take” for The Bahamas was clearly the lowest, and inversely the “free cash flow” projected for licensees in The Bahamas clearly the highest. That chart was based on $100 per barrel Brent oil pricing and more current data than the Moyes data. Oil producers like Canada, Iraq, Nigeria, Libya and closer to home the US and Guyana are included in that study.

While very encouraging to the prospective investor, it may highlight some of the challenges ahead for a country with no oil and a limited mineral resource production history. This nation’s experience with salt and aragonite production may prove poor preparation if the drilling BPC hopes will happen next year proves that world-class oil production potential here.

And the potential is massive.

John Bostwick II, attorney and author of “Bahamas 20/20 Vision” told Guardian Business on Friday that based on public statements made, BPC could be looking at $2.4 trillion worth of oil — his calculations based on $97.50 per barrel prices. He says the size of the potential oil traps may be missed by many.

“I don’t know if people really are focusing on what they are saying,” Bostwick said. “Supergiant traps, not giant — supergiant.”

Supergiant oil traps have 5 billion or more barrels of ultimately recoverable oil.

In its recent investor report, BPC’s leads and prospects showed about 9 billion barrels as the ‘most likely’ yield level from structures in the southern fold belt covered by four of its licenses. If the traps there had a 100 percent structural fill, a less likely scenario, they could hold 24.3 billion barrels. At $100 per barrel for oil, that’s $2.4 trillion across the life of those fields. If predictions by many economists for a continued increase in oil prices prove true, that total value escalates. And that value is only for the areas BPC has done some survey and other research work on — it has additional exploration license applications in the pipeline.

According to the Petroleum Act, a licensee would pay a royalty “at a rate of not less than twelve and one-half per centum of the selling value at the well-head of the petroleum won and saved from the licensed or leased area.”

Information available on BPC’s website details the rates further. The royalty rates are 12.5 percent for oil production up to 75,000 barrels of oil per day (bopd); 15 percent for 75,000 to 150,000; 17.5 percent for 150,000 to 250,000; 20 percent for 250,000 to 350,000; and 25 percent for any amount in excess of 350,000 bopd. Gas production is set at a 12.5 percent rate, and land is rented for $0.92 an acre per annum, though rentals are deductible from royalty payments.

Just for illustration, if 500 million barrels of oil are produced in a year under those license terms, with oil at $100, it would generate about $11.4 billion in annual royalties for government. That assumes production is averaged out across a 365-day year. That’s a lot of roads — or schools, universities, hospitals, court rooms, police equipment, training programs, etc. For comparison, the entire gross domestic product (GDP) of The Bahamas in 2007 was 7.2 billion, according to World Bank data.

But is it enough? Based on BPC’s investor presentation, it’s may be a good deal for their investors.

The issue is likely to grow in prominence for Bahamians as more research is done, and particularly if drilling results change the narrative from a story about possibilities to a story about how The Bahamas became an oil giant.

Despite the billions a government stands to make, when the cost-benefit analysis is done, the potential benefits at least seem less strong than they could be. At least not when compared to what many other nations are able to secure for their petroleum assets.

5/23/2011

thenassauguardian