By NEIL HARTNELL
Tribune Business Editor
An oil explorer is aiming to seize "the current window of opportunity" to drill its first Bahamas well after five years of regulatory and oil price-related delays "abated".
Simon Potter, Bahamas Petroleum Company's (BPC) chief executive, told shareholders that the company "had gained considerable momentum" in its efforts to both secure a joint venture partner and government approval for its first exploratory well in waters south-west of Andros.
He added that talks with "a major international oil company", with which BPC has signed a three-month exclusivity, were "progressing constructively" as it bids to tie-down a "farm in" partner to share the costs and technical risks associated with that first well.
Tribune Business reported last month that the exclusive joint venture partner talks, as well as BPC's request for the necessary government permits, brought oil exploration in Bahamian waters two steps closer following a period where Mr Potter conceded progress had been "disappointing".
"The outlook for the oil and gas industry in 2018 is more positive than it has been in any of the past five years, given the sustained recovery in the oil price and the pick-up in global exploration activity," Mr Potter told BPC's shareholders in commentary attached to the company's 2017 annual results.
"The strong fundamentals of our project remain unchanged - we have a world-class asset, with multi-billion barrel potential. It is thus incumbent on us at the company to use the current window of opportunity, and during 2018, move forward to finalising an agreement sufficient to enable the commencement of the first exploration well on our licences."
Mr Potter said these factors had "added energy and urgency to our farm-out process, which has gained considerable momentum over the year... We are currently in an exclusivity period with a major international oil company, and I am happy to report that discussions are progressing constructively".
The Bahamian-based oil explorer will entertain no other parties during the three-month exclusivity agreement, with Mr Potter previously telling Tribune Business that the oil major's move represented a show of confidence in BPC's project and its prospects of success.
He declined to name BPC's potential partner, citing confidentiality agreements, but it will pay the company $250,000 per month for the duration of the initial exclusivity - netting the company a total $750,000. The prospective "farm-in" partner also has an option to extend the exclusivity for a maximum further three months, again paying the same rate.
BPC's rate of progress had already heated up the previous week, with the company submitting its 'Environmental Authorisation' application for the necessary permits in that area to the Government.
The search for a joint venture partner, who will share the financial and technical burden of drilling the first exploratory well, is the second 'parallel path' that BPC has been working on for several years, and it is now moving forward on both fronts.
Mr Potter said BPC was now talking to the Government about a further extension of its licence, which runs until June 2019, as well as the process for dealing with its 'Environmental Authorisation' application.
"The company is presently in ongoing discussions with the Government in relation to the extent to which a further extension is warranted as a result of other events outside of the company's control since 2015," he added of BPC's licence.
"In compliance with requirements introduced under the newly-implemented environmental protection regulations, the company filed an application for Environmental Authorisation in April 2018, representing the mandated first step under the regulations to commencing offshore field activity.
"The company is presently in ongoing discussion with the Government in relation to the process by which the application will be progressed in a timely manner."
Mr Potter blamed regulatory issues, as well as the "oil price collapse" between 2015-2017, for the protracted time it has taken to secure a joint venture partner and move its first exploratory well to the point of drilling.
"Progress in this regard over the last few years has been disappointing, despite our best efforts," he conceded. "Initiatives over this period were impeded by a variety of 'above ground' issues, in particular, the compound effect of two factors: The extensive length of time taken for licence renewal and the implementation of updated petroleum regulations in the Bahamas - in aggregate, over five years, and the oil price collapse in the period 2015-2017."
Describing the 'exclusive' negotiating partner as "a suitable candidate for partnership", Mr Potter said should talks prove successful it will take an ownership interest in BPC's licences "in return for paying all or a substantial part of the costs of an agreed drilling program (but at a minimum sufficient to see the first exploration well completed), and making a cash contribution towards the costs historically incurred by the company".
Bill Schrader, BPC's chairman, told shareholders that the Minnis administration viewed development of an oil and gas industry as a key component of the Bahamas' economic future based on its embrace of the $5.5 billion Oban Energies project.
"The new Government has made the development of a robust and successful local oil and gas industry a key plank of its vision and strategy for the Bahamas," Mr Schrader wrote. "This has included, for example, the new Government indicating its support for a $5.5 billion oil and gas refinery development on Grand Bahama in February 2018.
"Over the past six months, company management has engaged proactively and productively with the new Government, and we look forward to working collaboratively as we continue to progress our project."