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Oil Explorer 'Exceeds' Licence Renewal Terms

By NEIL HARTNELL

Tribune Business Editor

THE Bahamas-based oil explorer that has been rocked by Prime Minister Hubert Ingraham's assertion that he would not permit exploration/drilling in this nation if returned to office moved to further calm the international markets yesterday, saying it had "exceeded" all obligations required to obtain a further three-year renewal of its licences.

The Bahamas Petroleum Company's (BPC) share price staged a mini revival on London's Alternative Investment Market (AIM) yesterday, rising by 0.3 pence to close at 7.80 UK pence, after it saw more than 25 per cent, or one-quarter, of its market value slashed off it on Friday after global investors picked up on Mr Ingraham's remarks.

Some 163 million of its shares changed hands that day, and the company said there was no other reason for its stock price to drop so precipitously other than the Prime Minister's comments.

In a bid to further reassure is investors and the markets, Bahamas Petroleum Company yesterday issued a statement over the pending renewal of its existing licences, which are set to expire in two days' time, on April 26, 2012.

Bahamas Petroleum Company said: "The company confirms that its petroleum exploration licenses state that: 'Where the licensee applies for renewal and has complied with the Act, regulations and the terms and conditions contained in this license, the Governor-General shall renew this 'licence for a further period of three years.'

"Bahamas Petroleum Company believes it has significantly exceeded all license commitments and obligations, with cumulative expenditure in excess of $50 million.

"The Company is already working to fulfill the increased requirements of this next three-year phase."

This mirrors the comment made by Dr Paul Gucwa, Bahamas Petroleum Company's chief operating officer, when he told Tribune Business last week: "Our licence gives us the obligation of drilling a well. We are required under our licence to drill a well, and we are preparing to do that."

The Bahamas Petroleum Company has to "spud a well" by April 26, 2013. In its recent 2011 results announcement, the Bahamas Petroleum Company said: "The group has given notice to the Government of the Commonwealth of the Bahamas of its intention to renew the licences for a further three-year period, precipitating the requirement that the group spud a well by 26 April, 2013, in order that these licences remain valid.

"The Group is required under the exploration licences to remit annual rentals in advance to the Government of the Commonwealth of the Bahamas in respect of the licenced areas. By letter dated 20 March, 2008, the Government of the Commonwealth of the Bahamas approved a two-year extension to the existing three-year licence period, which now expires on 26 April 2012."

There is little doubt, though, that the episode has been extremely damaging to the Bahamas Petroleum Company, and may have undermined its credibility in the eyes of both existing and potential investors, as well as the companies it was negotiating with over a potential joint venture for well drilling.

The company is also exactly where it does not want to be: In the middle of a Bahamian general election storm, where it has been used as a political football - first by the DNA to attack the Government, and then by the FNM to strike out at the PLP.

There is little doubt that the Prime Minister's comments were made with one eye to the potential political mileage to be gained, another FNM statement yesterday suggesting that the PLP would be 'conflicted' when it came to dealing with any application by the Bahamas Petroleum Company if elected to government, given that Philip 'Brave' Davis is listed as its attorney, Perry Christie acted as a consultant to it, and Killarney candidate Jerome Gomez was its former country manager.

But, although the environmental and health and safety concerns are valid, and it is still unknown whether there are commercially recoverable quantities of oil in Bahamian waters, it is possible that the Bahamas - needing jobs and economic growth, and with a rising $4.356 billion national debt and 4 per cent fiscal deficits per annum - may be cutting off its economic future to spite its political face.

Winston Rolle, the Bahamas Chamber of Commerce and Employers Confederation's (BCCEC) chairman, told Tribune Business on Monday: "Something as significant as this is something that needs to be taken to the people for comment.

"Any initiative as significant as oil or LNG, or anything of that nature, from my perspective should not just be a political decision made by the political element. It should be the expressed view of the Bahamian people on this sort of thing."

"The only things being discussed right now are the possible negative ramifications," he added. "No one is taking a look at it from the significance of the economic impact, jobs, revenues, paid duties. There are a whole range of things that need to be looked at before we say 'yes' or 'no'.

"The decision-making process needs to be more than that. I think we need to take our interests in, and managing our country, to another level."

It is also unclear what impact the affair will have on the Bahamas' reputation, in the eyes of investors, as a safe, non-politicised investment destination.

The group, Concerned Bahamians Abroad (CBA), in a release yesterday, said: "As a publicly traded company, potentially thousands of its investors have been individually affected, including some CBAs.

"In addition, major institutional investors such as TD Direct Investing, Fidelity Worldwide Investment, Barclays Wealth, Standard Life Investments and other major international investment entities have invested in this project. To pull the rug out from under these important investors and thousands of others could be a major problem for the Bahamas going forward.

"These investors only recently monetised BPC within the past two years, during the FNM administration. It therefore makes it difficult for the administration to deny some knowledge of, and responsibility for, allowing this monetisation process to go forward if it knew that it would not be allowing oil drilling.

"BPC raised over $70 million from its investors to begin the oil exploration process. Sophisticated investors committing to this level of involvement will not easily forget what they may perceive as betrayal."

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