The Tribune

The Government was yesterday praised for sending “a signal that the Bahamas is open for business” by moving to bring the oil exploration regulatory regime into law, a move that will facilitate well drilling in 2017.

Simon Potter, the Bahamas Petroleum Company’s (BPC) chief executive, told Tribune Business that the second House of Assembly reading for the Petroleum Bill and accompanying regulatory package represented “one step on the road” towards spudding its first well.

He reaffirmed that restarting the Bills’ passage through the legislative pipeline would give potential joint venture (‘farm in’) partners for BPC’s first exploratory well greater clarity and certainty regarding the investment climate they will face, improving the company’s ability to close a deal.

And the Christie administration’s move will also ease the concerns of BPC’s shareholders, some of whom have complained to Tribune Business in recent months about the Government’s seeming inaction on moving the legislation forward.

Speaking after the Bills and accompanying regulations were reintroduced to the House yesterday morning, Mr Potter said BPC’s shareholders and potential well partners would view the move as “reaffirmation” of the Government’s position to facilitate oil exploration activities in Bahamian waters.

“We see this as very positive for the Government and for ourselves,” the BPC chief executive told Tribune Business. “It’s more of a signal that the Bahamas is open for business.

“It’s the sort of backdrop we need to engage capital and help attract it.”

Mr Potter said “a modern framework for investment” was invaluable to BPC’s efforts to attract a joint venture partner for its first exploratory well, which is required by April 2017 under its licence terms with the Government.

BPC has estimated that the first well will involve a $60-$100 million total investment, with yesterday’s legislative move set to further ease any concerns potential ‘farm in’ partners may have over the Bahamas’ business environment.

“Any investor doesn’t like uncertainty, so the fact these regulations are in the public domain, and the Government has clearly signalled the basis on which exploration will be conducted, is obviously good,” Mr Potter told Tribune Business.

“No potential investor likes uncertainty. You can never remove all technical uncertainty from the geology and sub-surface, but to take away some of the ‘above ground’ issues is nothing but helpful.”

With the Government moving on what it needs to do, BPC’s first exploratory well now depends on it finding a joint venture partner, the necessary financing and selecting the design/location of the well.

“This is one step on the road,” Mr Potter told Tribune Business of yesterday’s activity by the Government. “The important thing is to get this partner on board, and then we will know what’s down there for certain once we get this well drilled.”

The BPC chief previously told this newspaper in a November 2015 interview that the search for a joint venture partner was “taking longer than we would have hoped”, having also been hurt by the steep decline in global oil prices.

The legislative package’s second reading removes one potential obstacle, and also eases the fears of BPC shareholders, who had become concerned over seeming “foot dragging” by the Bahamian government.

David Lawson, a UK-based BPC shareholder, told this newspaper in November that the legislative delay was also exacerbating BPC’s ‘cash burn’ rate and depressing its share price.

Mr Lawson, in his missive to Tribune Business, asked: “Why it is taking so long to bring the new regulations to the House to be passed into law, enabling BPC company to search for a suitable farm-in partner and to explore by drilling one, maybe two exploration wells which, if successful, could transform the finances of the Bahamas, eradicating national debt and raising the living standards of the people of the Bahamas?”

Mr Lawson described oil exploration as a game changer for the Bahamas’ economy” - something this nation requires urgently.

The Government brought the required legislative package to the House of Assembly for its first reading earlier this year, only to cut the debate on the Bills short because Opposition MPs complained they had not been presented with a revised Petroleum Bill draft containing 12 changes to the original.

The Petroleum Bill is the key piece of legislation, as it establishes the legal basis for oil exploration in Bahamian waters, plus a regulatory framework that will govern the wider oil/energy industry.

Mr Potter yesterday emphasised that the legislation and accompanying regulations “apply to the whole industry”, and would benefit companies other than BPC, including rival exploration firms.

“It’s across the board,” he told Tribune Business. “We’re one player in all of this, and to the extent there are other companies who believe there are prospects elsewhere in the Bahamas, it should encourage them.”

Mr Potter confirmed that BPC had spent $100 million on seismic testing and assessing previous wells drilled in Bahamian waters, building up a comprehensive database for potential joint venture partners to assess.

While the dramatic plunge in global oil prices had dampened interest, Mr Potter said BPC’s ‘scarcity value’ - it was one of the few prospects with potentially large quantities of oil - would help offset this.

“They gravitate to large opportunities, the sort of projects that can move the dial,” he explained of oil industry players.

“The potential of the structures we’ve identified in the southern Bahamas is huge. When I say ‘good and bad’, there’s less capital available but it is differentiated based on a smaller number of projects that are very large.”

Mr Potter said the modernised, upgraded regulatory regime would benefit the Government and Bahamian people, as well as BPC, by ensuring environmental and health and safety requirements that met global best practices and standards.

BPC has predicted that its exploration activities could ‘break even’ with the global oil price as low as $30-$40 per barrel, and an oil field of just 200 million barrels - small by global standards.