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DRILLING BEGINS . . . but Bethel says govt will negotiate a bigger share if oil is found

The Stena IceMAX.

The Stena IceMAX.

photo

Attorney General Carl Bethel. (File photo)

By KHRISNA RUSSELL

Tribune Chief Reporter

krussell@tribunemedia.net

ATTORNEY General Carl Bethel assured Bahamians that the government intends to renegotiate the scale of royalty fees if commercial quantities of oil are found in the country.

His statement came the same day Bahamas Petroleum Company announced it had begun drilling its exploratory well in Bahamian waters.

Mr Bethel accused the Christie administration of “gross negligence” by “short-changing” the Bahamian people out of higher royalties from the deal it left in place before being voted out of office.

“I wish to assure the Bahamian people on behalf of the government of the Bahamas that, should commercial quantities of oil be found, and should permission to extract the same be given, the government will certainly renegotiate the scale of royalty fees which will be paid, both to the Consolidated Fund, but also to the Sovereign Wealth Fund, for the immediate benefit of every Bahamian,” Mr Bethel told the Senate yesterday.

He sought to address what he described as “certain erroneous statements” made by PLP Leader Philip “Brave” Davis recently in the House of Assembly that the Free National Movement government had issued the original lease and approvals for such exploration, and that the Progressive Liberal Party government had subsequently “improved” the terms of the approvals.

BPC, meanwhile, announced yesterday morning it had started drilling of the exploratory well, Perseverance #1. The company said the well was “spud” on December 20 at 6.30 EST. The well is anticipated to take 45 - 60 days to complete.

The Tribune reached out to BPC on Mr Bethel’s pledge to renegotiate royalties, but was told no comment would be made.

However, in a statement on the start of the drilling, BPC CEO Simon Potter said the company viewed it as a “momentous milestone”, adding the highest environmental and safety standards would be followed.

Mr Potter said: “We are very pleased to announce that the drilling of the exploratory well, Perseverance #1 has commenced – the well has been spud. This is a momentous milestone for both BPC and the Bahamas and represents the culmination of more than 10 years’ work by a team who have remained steadfast in their belief in this project throughout – that it is finally taking place is a testament to the application, skill and professionalism of many people over those years.

“The well will be drilled to the highest environmental and safety standards over the next 45 - 60 days. Our shareholders have been extremely patient, but we are now within a couple of months of understanding the scale of potential resource uplift that might be accessed within the licences: a potential uplift that is the traditional domain of the ‘oil majors’.

“More than a decade ago BPC secured several offshore hydrocarbon licences in the far-southern waters of the Bahamas. Convinced of the compelling prospectivity of those licences, the company has spent close to $120m bettering our technical understanding, continuing to de-risk the play, and ultimately preparing meticulously for exploration drilling.

“Our 3D seismic survey revealed structures that have the potential to contain a world-class, multi-billion barrel oil resource that, if present in the way we hope, could prove to be transformative – not just for our company, but for the nation and people of the Bahamas as a whole.”

Agreement

This comes on the heels of continued pushback by environmentalists.

Prime Minister Dr Hubert Minnis has also voiced his opposition to oil drilling in Bahamian waters, but said his administration met an agreement already in place.

Activists have applied for a judicial review in the Supreme Court to block the drilling, however, the matter has not yet been heard.

Yesterday, Mr Bethel said the original approval for oil drilling and leases of ocean floor areas for the purposes of oil exploration were given and executed by the first Christie administration on April 26, 2007 and not by the FNM.

The law firm which incorporated and acted for the oil company in 2007 was Davis & Co, Mr Davis’ firm.

“The renewal of those leases, with minor changes, was executed by the second Perry Christie administration, on the 8th June 2015,” Mr Bethel said.

“At no stage did any FNM government ever issue or renew any lease of ocean floor for the purposes of oil exploration or drilling. The renewal of the leases by the PLP government in June of 2015 incorporated and extended the original lease issued by the PLP government in April 2007. However, the only change in the renewed lease was an increase in the rental fee from $57,500 for each tract of ocean floor that was leased to $250,000 for each tract leased.

“Contrary to what was asserted by the leader of the opposition, the PLP merely ‘improved’ on this aspect of their grant to BPC; not on any grant by the FNM - which never granted anything.

“Significantly, what was not changed was the amount of ‘royalties’ which would be payable to the Bahamas government in right of the Bahamian people, should commercial quantities of oil be found.”

Mr Bethel said in 2016, the PLP passed a new Petroleum Act, which then specified two methods of calculating royalties.

Despite this, he said the same rate of royalties, based upon a low percentage of the “net petroleum won and saved from the licensed area” was maintained by the PLP, without any change.

“This original provision was not in accordance with the law under which it was purportedly issued, because the price from the well in the old Act was not tied to the ‘net value’ of petroleum. It set a basic rate of ‘not less than 12.5 percent on the selling value’ of oil produced at the wellhead. This was a royalty based upon the selling price, not the ‘net’ value.

“The PLP government in 2016 did not change the level of royalty payments, and apparently was content merely to receive between 12.5 percent and 25 percent of the value of extracted petroleum, after the oil company had deducted all their investment and production costs.

“Clearly the PLP government was content to be a subject to the accounting practices of the oil company, in calculating what they say was their costs of operation and return on investment; and content to accept a miserably low rate of taxation or royalties on that amount.”

He continued: “This raises some questions because in 2014 the PLP government had already received the advice of the Commonwealth Secretariat on how to maximise the revenue payable to the Bahamian government in right of the Bahamian people; yet, curiously, in 2015 when they renewed the leases, the PLP government did not change method of calculating the royalty fee, despite the advice received from the Commonwealth Secretariat, even though their attention had been specifically drawn to the low royalty fees contained in the original lease. The deal was simply renewed by the PLP government without any change; knowing full well that the Bahamas government and the Bahamian people were being short-changed.

“The terms of the original leases as to the amount of royalties payable, which were continued, without change by the PLP, either reflect gross negligence by the PLP government in 2007 and 2015, or they reflect something else. Was it intentional?”

Mr Bethel said in 2019, the government again consulted the Commonwealth Secretariat, who again advised that the royalty regime did not meet the international standard, which exceeded 60 percent of revenue from the oil well.

“In fact, the ‘profit share’ varied between 45 percent and 75 percent of the net selling value, with a global average of around 60 percent. But it could actually be as high as 75 percent of the profits. The PLP left the amount at a maximum of 25 percent, having been advised, as we were advised, that the correct rate on net petroleum revenue should be no less than 45 percent, and possibly as high as 75 percent.

“The PLP government had been advised by the Commonwealth Secretariat, as we were subsequently advised, that the global standard rate of royalty payments for oil production is between 45 percent and 75 percent of net value of any oil extracted.

“Yet in 2007 the PLP set a ridiculously low level, of an average of between 12 percent and 25 percent on a sliding scale, which was agreed. In 2015, the PLP increased the rent payment for the ocean floor but did not change the sliding scale for royalty payments. Again, this was an act either of gross negligence, or it points to something else. Was it intentional?

“. ..It is noted that the chief executive officer of BPC, Mr Simon Potter, has publicly indicated a willingness to review the amount of royalties payable in respect of any commercial quantities of oil found,” Mr Bethel said.

Comments

bahamianson 3 years, 5 months ago

then consider dropping VAT and giving everyone a universal basic income.

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Sowell 3 years, 5 months ago

"Giving" everyone a universal basic income? Pray tell, who will pay for it. You do realize you cannot get blood from stone, correct? Even if the government were flushed with cash, it would still be a terrible idea.

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FrustratedBusinessman 3 years, 5 months ago

Lol. We can barely fund or run NIB correctly, I wouldn't even begin to think about UBI.

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joeblow 3 years, 5 months ago

I guess this dimwit does not understand that it does not matter how much you negotiate, if there is a spill we may never recover as all industries dependent on sun sand and sea will be destroyed!

What we stand to lose is far more than we stand to gain!

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ThisIsOurs 3 years, 5 months ago

also the time to negotiate isn't WHEN they find oil. They would have just increased their leverage why would they concede any ground to us?

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Hobo2500 3 years, 5 months ago

We need to know the break even point for drilling in that location. If oil has to be $120.00 a barrel for them to profit we might never get any royalties. It ain’t cheap to drill that far offshore

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tribanon 3 years, 5 months ago

This is a royal joke and says all there is to say about Minnis. There's no bigger hypocrite on the planet. Yes, indeed, Minnis's D- minions would likely be most surprised to learn whom among our political elite think they have a big horse in the BPC oil drilling gig.

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Chucky 3 years, 5 months ago

Someone please tell me why we listen to these politicians?

Are they not all liars?

I mean they either talk in circles and say nothing, or they lie!

Why listen to them ?

Why elect any of them?

The best thing we can do is ignore them.

If there is no good candidate nex election them we should abstain from voting.

Giving your vote to a politician because you estimate him or her to be marginally better, well that is just giving legitimacy to their rein.

Where as if they get very few votes, they will have no legitimate claim to being our government.

Quite obviously we need to reject any and all leaders that resemble our current and past leaders if we are to ever end this rein of nonsense.

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FrustratedBusinessman 3 years, 5 months ago

We need a "None of These Candidates" option similar to the one available to voters in Nevada.

It would probably win a plurality, or come second at the very least.

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DDK 3 years, 5 months ago

Criminal idiots, all of them.

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KapunkleUp 3 years, 5 months ago

Has this drilling agreement ever been made public in its entirety?

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ColumbusPillow 3 years, 5 months ago

More noise. Only the government has the authority to permit oil production in the Bahamas, BPC is conducting a test well NOT A PRDUCTION WELL! .The people of the Bahamas want to know if there are commercial quantities of either oil or natural gas.in this country.

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stislez 3 years, 5 months ago

Until we have a people willing to DIE for their country and people, the Bahamas will stay the same. It's to easy to persuade people with money and wealth. No one is safe from the persuasion. You have to have values an principles that money can't buy. Most of us Bahamians are all for ourselves which is what we was taught to be. We have to be willing to die for the greater good of all. Not fight! Willing to DIE! Just how you feel for your family you have be able to see your country and people as family as well or atleast extended family and move with the same convictions. As bad as america is and i mean f**ked up, you have mass groups of people who love the country and would willingly die for it. Yall is watch or atleast see foriegn news so yall kno. They come together to create change. All we do is talk talk complain then do nothing. Outta sight outta mind! Someone only gone do to you what you allow them to. I know its easier said than done but bey, if we don't get people who willing to DIE for the Bahamas and Bahamians, the world will continue to take advantage of what we own or supposed to own, which is our country, our land, our natural resources, our culture..............

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GodSpeed 3 years, 5 months ago

Will be interesting to see how the Bahamas markets oily beaches if Murphy's Law comes to pass.

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ThisIsOurs 3 years, 5 months ago

I can hear DAguilar now. Its no use talking about the past this is where we are and we have to make the best of it. We have to come up with a plan to get the economy going again. We've never done this before. Which govt has handled a major hurricane a pandemic and a catastrophic oil spill? Yes mistakes were made. We're all learning as we go We don't have a crystal ball. Who could have known?

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Greentea 3 years, 5 months ago

All these years people like Bethel been in government and for what? What do they have to show for their "service"? What have they brought to the table but ignorance and idiocy? Drilling in the most pristine waters of the world? Trash thinking from greedy, trash politicians. What do we have to look forward to but the prospect of oil spills and another election with another slate filled with pastors, rev drs, usher board members and many more all ill equip to manage an economy like ours, provincial in experience and provincial and ignorant in their thinking in a global world.

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thps 3 years, 5 months ago

one day the PM is against the deal and the next 'should permission to extract the same be given"

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