By NEIL HARTNELL
Tribune Business Editor
A $4.5 billion oil refinery and storage terminal is “aiming to hit the ground running in the New Year”, with construction set to create between 300-600 jobs “at a single time”.
Peter Kreiger, Oban Energies’ managing director, told Tribune Business that the group hoped to complete Heads of Agreement negotiations with the Government for the Grand Bahama-based project “within weeks”.
Completion of that agreement will enable Oban’s Environmental Impact Assessment (EIA) to be submitted for approval, and kickstart the permitting and approvals process, with Mr Kreiger optimistic this would begin in the New Year. He added that the group aimed to begin pre-construction in 2018, describing the project as “a win-win” for both Oban and the Bahamas - especially where the latter’s economy and employment were concerned.
“We’re actually pretty far along in the sense that we are currently negotiating a Heads of Agreement with the Government,” Mr Kreiger told Tribune Business. “It should be done in the short term, hopefully over the coming weeks.
“We’re also probably about three-four weeks from wrapping up our EIA. We will be submitting that to the Government, assuming the Heads of Agreement is done in that time, as well. The goal is by the end of the year, beginning of the New Year, to begin the permitting process.
“I think that in a perfect world, which you and I both know never exists, we could hopefully be in position by Spring to have our permitting done and pre-construction possibly starting. If not, definitely by the end of 2018. We’re going to be hitting the ground running here, hopefully in the New Year.”
Oban is proposing a $1.5 billion first phase investment in a 20 million barrel, “multi-purpose” bulk storage facility for petroleum products, which will be located within one to two miles of east Grand Bahama’s existing Statoil terminal.
The development, which is expected to be completed in 2021, also involves a 250,000 barrel per day oil refinery. This represents the potential return of oil refining to Grand Bahama, and means Oban is envisioning a grander project than the existing Buckeye Partners-owned BORCO facility.
Mr Kreiger yesterday said the project would generate between 300-600 construction jobs at “a single time”, depending on the build-out phase, with some 80-120 posts created when operations launch.
“The majority of those jobs will be higher paying jobs than the average Bahamian salary, according to the economic study we’ve provided to then Government,” he told Tribune Business.
“We feel it will be a valuable contributor to help the economic recovery for the island. The study showed that for every dollar earned by someone employed by us, the economy will feel a 1.6x (times) multiplier effect. People will be going out to dine more, going to the theatre more and stimulating the economy now they have more disposable income.”
Mr Kreiger added that the oil storage terminal’s first phase would require a $300 million investment to build-out to a four million barrel capacity. The facility will require two more phases to complete, one featuring the addition of six million barrels, and the latter doubling capacity by 10 million barrels to the target 20 million.
“That will be needed to support the refinery,” he said of the storage terminal. “That refinery will start with 25,000 to 50,000 barrels per day, and as market demand dictates we will grow from there.”
Bahamians have grown increasingly sceptical about so-called ‘mega’ multi-billion dollar projects, given that many have been promised but few have been delivered since the turn of the century.
Acknowledging the concerns, Mr Kreiger said Oban Energies’ two investment banking partners - Stifel, Nicolaus & Company and Drexel Hamilton - had visited the Bahamas twice to provide the Government with verbal and written assurances that the necessary financing will be forthcoming.
“Our investment bankers have flown down and given assurances to the Government in person twice - once to the Deputy Prime Minister, and the other to the Bahamas Investment Authority (BIA) - that the funds will be available and accessible once permitted,” he told Tribune Business.
“Other than the fact we’re spending money hiring local Bahamians, and have bankers coming down and giving all the necessary assurances - verbal and in writing - there’s not much more we can do.
“We’re not the type of firm to say: ‘Trust us, it’s coming’. We want actions to speak louder than words. We’ve probably spent $10 million in pre-construction and engineering costs to show our commitment, and if we find the talent we intend to hire as many local people as we can. Just see; we’re putting our money where our mouth is.”
Oban Energies has hired Bahamas-based Islands by Design as its environmental consultants, with Lambert Knowles also engaged to perform geotechnical work. The Mosko Group has also been hired for construction and engineering work.
Mr Kreiger confirmed to Tribune Business that Oban Energies had offered to supply fuel at “preferential prices” to Bahamas Power & Light (BPL) and other local utilities, in a bid to help lower this country’s energy costs.
“We have offered to do that, and give preferential pricing to the Government in order to show both our support for the community as well as the fact we feel this could be a win-win for everyone,” he said.
“It’s something the Government would like to explore, but right now everyone’s focused on the permitting and getting the project off the ground.”
The Minnis government, by word and action, is intent on restructuring the Bahamas’ economic model and repositioning this nation to attract new industries, having seemingly realised that the ‘twin pillars’ of tourism and financial services are no longer sufficient to meet its employment needs.
The Bahamas has effectively needed an economic ‘game changer’ for a decade, and especially since the 2008-2009 recession, and the Oban Energies project - if it succeeds - could help achieve that objective.
Mr Kreiger told Tribune Business that Oban Energies had been eyeing the Bahamas since 2008, having obtained an ‘approval in principle’ from the Ingraham administration that year, only to be derailed by the global downturn.
He explained that the group had to wait until financial and energy market conditions improved, and resumed work on the east Grand Bahama project some 18-24 months ago.
Oban Energies selected its project site based on the deep water access available to large tankers, and the land access to the ocean. Statoil’s presence meant the area was already a ‘brownfield’ site, lessening the environmental concerns, while the location is also well-removed from populated areas.
“The development fully built-out will probably be in the neighbourhood of a couple hundred acres to facilitate both the storage and refinery,” Mr Kreiger said. “To find property with clear title is not the easiest thing to do in Grand Bahama, but we have it under contract with deposits down depending on permitting from the Government.”
He praised the co-operation and enthusiasm displayed by the Minnis administration to-date, and said Oban Energies may later include a liquefied natural gas (LNG) component at its east Grand Bahama site.
“The initial approval in principle we had did include LNG,” Mr Kreiger told Tribune Business. “But because of the need for pipelines and other things that were not very well received in the past, we decided to focus on storage and the refinery.
“We are interested in looking at LNG again in the future, but right now - because of what we believe to be a more favourable economic and political environment - we believe storage and the refinery will be the best place to start.”
Oban Energies, like BORCO, is aiming to exploit Grand Bahama’s US proximity and location on major shipping routes to serve as an offshore distribution/break bulk hub to an energy industry struggling for deep water ports on the Gulf Coast and south-east US.
Larger vessels from North Africa, Europe and Asia can have their loads broken down, and transferred to smaller vessels, who will then take the product from Grand Bahama into the US. And US oil and energy exports can use the same route in reverse to get their products to market.
“We could see with the success of BORCO that the demand is quite significant, and it’s only growing with the vast reserves the US now tapping into,” Mr Kreiger.