By NEIL HARTNELL
Tribune Business Editor
The Bahamas Petroleum Company's (BPC) top executive has acknowledged it is now better placed than ever before to deliver a first exploratory well in this nation's waters by mid-2020.
Simon Potter told Tribune Business that shareholder approvals at BPC's recent annual general meeting (AGM) had provided total certainty that it will be able to finance the $20m-$25m well costs whichever route it took to get there.
Disclosing that "substantial progress is being made on all fronts", Mr Potter added that the government's extension of BPC's licences until the end of next year had helped to "focus minds" on the task in hand and give the oil exploration outfit impetus to rapidly press forward.
Conceding that BPC may have been too "pre-occupied" with the search for a joint venture 'farm-in' partner to share the financial and technical risks associated with its exploratory well, he said the company's securing of "world class" rig and services providers was "a measure of the progress we've made".
Mr Potter added that both BPC and its consultants, and the Government's consultants, were working towards an end-2019 target for the completion and submission of documents required to obtain Environmental Authorisation (EA) for the first well.
"We're progressing forward on many fronts," Mr Potter told Tribune Business. "The Government fixing the time period of our licence to run through to the end of 2020, it makes clear the timeframe in which we're obliged to deliver a well, and that focuses the mind. We've been focusing on four areas to deliver a timely, efficient and responsible well."
He identified the first as rig operations and the "essential services" required to deliver a first exploratory well in waters south-west of Andros, near the maritime boundary with Cuba.
This has resulted in the agreement with Seadrill, one of the world's largest offshore drill rig companies, for the provision of a sixth-generation drilling rig, along with the selection of Halliburton, as its integrated well services provider, and BakerHughes GE to provide wellheads and other well-drilling equipment.
"We've locked in the pricing and commercial terms for provision of the rig and services from these global companies," Mr Potter added. "That's important in establishing the cost of the well, and provides assurance to the Government that we will deliver on our well obligation."
He explained that the rig provision contract with Seadrill will also help fill in the remaining gaps in BPC's Environmental Management Plan (EMP), and help update it, given that there is now confirmation on the size of rig that will be used and the nature of safety equipment on board.
"We completed an Environmental Impact Assessment (EIA) in 2012, and that was part of the application we made in 2018 with the Environmental Authorisation (EA)," Mr Potter said. "The BEST Commission appointed Black & Veatch as their independent consultants.
"They issued a report and we are working with it, one of our consultants, to finalise the documents required for the EA. We have a shared target of the end of 2019 for that batch of documents to be completed and submitted to the Ministry [of the Environment], certainly."
Besides permitting and hiring the necessary qualified staff, Mr Potter said funding for the exploration well was BPC's fourth concern. "In many ways we were slightly pre-occupied with the farm-in search when the primary mission is to drill the well," he conceded.
The AGM approvals, several of which related to financing, gave the go-ahead to a conditional agreement with Bizzell Capital Partners, an Australian-based oil and gas exploration financier, to provide a £10.25m convertible loan that can be switched into equity shares.
That sum, which translates into $12.5m, is equivalent to half the cost of the $25m initial exploration well and will help underpin its drilling should a joint venture partner not be sealed in time. The AGM outcome has thus essentially assured BPC will be able to finance the well regardless of whichever route it takes to get there.
This was confirmed by Mr Potter, who told Tribune Business: "We've got a range of options for funding that is certainly going to deliver the $25m needed to deliver the well.
"We've identified, given that we've locked in the pricing through the technical agreements we have, a $20-$25m range for the well. This isn't a number plucked out of the air; it has considerable engineering gone into it.
"The pricing of rigs has come down considerably, and we've locked in the rig price per day," he explained." We can be fairly certain about costs. The rig is coming from the Gulf of Mexico, which is very close to The Bahamas, so in terms of pricing, logistics and transit time, that's relatively minimal."
Many Bahamians will likely be sceptical as to whether any oil exploration activities will take place, given the lengthy process BPC has been embarked on, but Hurricane Dorian's devastation will likely strengthen the calls that this nation has nothing to lose in determining whether commercial, recoverable quantities of oil are located within its waters.
Mr Potter, meanwhile, added that improvements in drill bit technology would also increase the speed at which BPC could penetrate and drill through subterranean rock structures to locate the presence of oil below the seabed.
The oil explorer has been moving to de-risk its project technically in recent months, having collaborated with the Cuban National Oil Company (CUPET) to analyse its data and oil samples in a bid to assess prospects of success.
Reiterating that BPC's success could "yield considerable potential value for The Bahamas", Mr Potter said this nation did not have to wait on royalties to start benefiting. He added that the discovery of proven quantities of oil could almost immediately allow the Government to start "rebasing" its loans and debt.