The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Opposition’s finance spokesman yesterday backed the Government’s plan to create a sovereign wealth fund in principle, arguing that it should receive all royalty payments related to exploitation of this nation’s natural resources.

K P Turnquest, the east Grand Bahama MP, said such a fund should also derive income from royalty payments made to the Government from the likes of salt, sand, rock and aragonite exporters, not just potential earnings from oil exploration.

Kenred Dorsett, the minister of the environment, told Tribune Business yesterday that the creation of a sovereign wealth fund was among the legislative package the Government was developing to regulate oil exploration in the Bahamas.

“It’s an interesting idea,” Mr Turnquest told Tribune Business.”It certainly sounds like they’re on the right path. We have to see the fine details and the legislation put forward, but the idea of a sovereign wealth fund certainly makes sense.”

He based his support on the fact a Bahamian sovereign wealth fund should, in theory, invest royalty income derived from this nation’s natural resources on the people’s behalf, placing it into productive investments rather than co-mingling these revenues with the Government’s other monies in the Consolidated Fund.

“The assets would be vested for the benefit of the Bahamian people,” Mr Turnquest told Tribune Business, “whereas some of the other assets that we’ve sold off, the royalty fees we collect got into the Consolidated Fund.”

Sovereign wealth funds, such as Singapore’s Temasek, have been established by many Middle East and Asian nations as vehicles to hold multi-billion dollars worth of assets and revenues, which are generated from sectors such as oil. These funds are then invested in productive areas of the global economy.

“As I understand it, it would be objectively managed by a Board that is more accountable to the Bahamian people,” Mr Turnquest said of the sovereign wealth fund plan.

“Definitely, I think it’s a move in the right direction in terms of creating the kind of transparency and objective management of our national assets that we need in the modern Bahamas,. But it’s all in the details.”

Commercial quantities of oil have yet to be confirmed in the Bahamas, so whether it is worth establishing a sovereign wealth fund - let alone how much money it might receive - might be seen as premature to many.

This nation should have a much better idea come 2015, given that the Bahamas Petroleum Company (BPC) has a licence obligation to spud its first exploratory well in April some 80 miles south-west of Andros, near the maritime boundary with Cuba.

BPC’s original agreement with the Government effectively gives this nation a 50/50 profit split if it discovers commercial quantities of oil, with the company paying a sliding scale of royalties between 12.5-25 per cent, depending on how much volume is recovered daily.

In previous presentations to numerous Bahamian society groups, BPC has shown, using an $80 per barrel oil price as an example, that 50 per cent of that revenue – some $40 – would go to cover costs.

That would leave $40, or 50 per cent, left, which would be split 50/50 between the Government and BPC. Over a 20-40 year timeline, if commercial quantities of oil are discovered in the Bahamas, BPC has projected that itself and the Government would each earn $20 billion in revenues, with development costs totalling $40 billion.