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'Three Weeks From Oil Drilling.. Then Covid'

photo

Simon Potter

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamas-based oil explorer yesterday revealed it was “within three weeks” of drilling its first well until COVID-19 intervened as it unveiled a revised timetable taking its operations into the 2021 first quarter.

Simon Potter, Bahamas Petroleum Company’s (BPC) chief executive, told Tribune Business the pandemic-enforced delay may have worked to its advantage after the company announced it had signed “a definitive contract” to secure the rig that will drill its first exploratory well in waters to the south-west of Andros.

Besides a 15 percent drop in the cost of BPC’s Perseverance One well, Mr Potter said the deal with Stena Drilling would now see the rig provided on an “unconditional” basis as opposed to the conditional terms attached to an earlier deal when it was targeting the 2020 first quarter to begin drilling.

He added that the new rig contract signing meant BPC is now committed to drilling a Christmas 2020 well in the 47-day “window between December 15, 2020, and February 1, 2021, which means that the Government will have to agree to extend the company’s licence terms beyond their current end-December expiry.

BPC previously invoked the “force majeure” contract in its licence agreement, which deals with “unforeseeable circumstances” preventing one party from fulfilling the terms of a contract, and said in its statement announcing the rig contract that it is seeking “clarification from the government” that its licence terms can be extended until “at least June 2021”.

The government has made no public comment on whether it has accepted BPC’s “force majeure” request or if it will agree to extend the licence beyond end-2020. Mr Potter confirmed that the government had acknowledged receipt of BPC’s request, but Romauld Ferreira, minister of the environment and housing, has not returned Tribune Business calls or messages seeking comment despite having ministerial responsibility for the matter.

Mr Potter, meanwhile, described the rig contract signing as “a decisive step” that removes “any kind of ambiguity”. He added that it should demonstrate to sceptics that BPC and its project were “real”, given the years and millions of dollars spent on investigating commercial oil prospects below The Bahamas’ seabed.

Recalling how close BPC had come to hitting its original April 2020 deadline to spud a first exploratory well, Mr Potter said the company had secured the drilling rig; the assistance of two major oil services companies, Haliburton and Baker Hughes; acquired the necessary funding, sourced all needed equipment; assembled the necessary workforce and opened an office in Houston.

And, with the required Environmental Authoristion obtained from the Government, he told Tribune Business: “With all that bottled together we were on the cusp of drilling the well. We were within three weeks of starting when COVID-19 intervened.”

He explained that the pandemic meant BPC was unable to guarantee the health and safety of the rig’s crew, while the closure of international borders threatened to impede the movement of staff in and out of the vessel. And the impending start of hurricane season on June 1 meant that all drilling activity had to be pushed back beyond its November 30 close to avoid further disruption.

“There were double gates that we had to pass through,” Mr Potter said, “which meant that when we packed up shop in March this year we wouldn’t realistically be able to drill the well until November-December this year because of COVID-19’s impact and hurricane season.”

He added that the rig contract with Stena Drilling had now “fixed a time window” between December 15, 2020, and February 1, 2021, when Perseverance One will be drilled. “It’s certainly a decisive step for us,” Mr Potter said of securing the rig. “We didn’t want there to be any kind of ambiguity, so we stepped forward and got the contract. It’s a fantastic ship; it’s one of the highest-spec rigs in the world. It’s a very modern, clean looking vessel.”

The BPC chief said rig costs had fallen by around 15 percent, from $25-$30m to now $21-$25m, while the timing and commercial terms were now fixed. And Stena had also been given the opportunity to invest its own money into BPC’s exploratory well project.

“Based upon the licence terms and prevailing regulations (and allowing only for the duration of disruption to operations to-date), the company expects that the current exploration period of its licences will extend until at least April 2021,” BPC said in its statement. “However, given the likely further continued COVID-19 related disruption, the company has sought clarification from the Government on an extension to at least June 2021.”

It added that the COVID-19 related delay had created “an additional six months of general working capital needs”. With $12m in cash holdings, BPC said that it would likely have $9m left when it came time to drill the first exploratory well.

“On the basis of this revised total well cost estimate of $21m to $25m plus potential contingencies, the company’s current funding ‘gap’ for Perseverance No.1 is in the range of $12m to $16m - plus a further $5m to $10m depending on the extent to which potential contingency/provisional costs may be required/opted for,” BPC added.

However, it pointed to two facilities - worth a combined $34m - previously arranged that are available to be drawn down as and when needed. One is described as a “£16m (approximately $21m) facility with a Bahamas-based family office investor for a zero-coupon”.

“Given current market conditions and the revised drilling timing, the company is now actively seeking to revisit all potential funding sources for Perseverance No.1 with a view to optimising the availability and cost of its funding,” BPC said.

“This includes continuing to pursue a farm-in, and farm-in discussions remain on foot with a number of parties. Stena Drilling has also been granted certain options to invest in BPC or the project.”

BPC’s oil exploration activities remain controversial with Bahamian public opinion split on the issue. Many observers continue to question whether the company is for real, while environmental activists and others fret about the impact any spill or pollution could have on the country’s environment and tourism industry when it re-opens following COVID-19.

Environmentalists recently celebrated what they saw as a major victory as multiple Florida congressmen and women, including some close to the Trump administration, wrote to US secretary of state, Mike Pompeo, urging that he oppose BPC’s oil exploration plans.

Others, though, argue that the economic crisis created by COVID-19 means that The Bahamas cannot afford to spurn the opportunity to discover whether commercial quantities of oil exist within its territorial waters given the potential positive impact this would have for the government’s fiscal position and country overall.

However, “if” remains they key word regarding any prospect of discovery for the time being, with any prospect of economic diversification from BPC’s activities still some way off regardless of whether oil is found. The company said the recent collapse in global oil prices will not affect its activities based on its belief the market will recover.

Comments

sealice 4 months ago

really it's OK drilling oil wells in the Bahamas for a product we can buy from venezuela for .05 gallon? Probably cheaper right now? It's not going to create any volume of jobs and most Bahamian's probably aren't qualified and BPC is probably 80% workpermit employees.....And with no environmental controls or enforcement because our government can't even monitor themselves.... BAMSI, this Covid Fiasco.... why would any Bahamian want this? you going to make this oil cheaper then a nickel a gallon please nothing is cheaper in the Bahamas especially nowadays

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thps 4 months ago

On one hand, it's illegal to use often re-used plastic shopping bags, but on the other hand, let's drill for oil.

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BahamaPundit 4 months ago

Please, would this company just go away and leave our Country in peace.

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lordziom 4 months ago

I was proud to live in a country that was part of the Paris Agreement, a country moving in the right direction by shifting away from plastic bags, a small country that was being an example to the person they have in the White House who pulled the USA out of the Paris Agreement, but this is disheartening to say the least. I have hope that our government will listen to scientists and strive to protect the wonderful ecological landscape of this country.

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Proguing 4 months ago

All we need now is a big oil spill on our beaches. That will keep the tourists from ever returning to our shores.

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Jim 4 months ago

America is capping some of their oil wells due to surplus in supply, perhaps Bahamas could invest in these.

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RealTalk 4 months ago

This is a disaster waiting to happen...

Ask yourself how is this going to benefit Bahamians?

Ask yourself if you think these people https://www.bpcplc.com/about-us/board...">https://www.bpcplc.com/about-us/board... or https://www.bpcplc.com/about-us/staff...">https://www.bpcplc.com/about-us/staff... really care about Bahamians. Who are these people is the question!

THESE ARE NOT BAHAMIANS! The country is for sale....sad

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Bahama7 4 months ago

Huge amounts of oil are under the sea.

It was struck in the 70’s, these boys are targeting the real deal.

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Porcupine 4 months ago

Here we go again. Mr. Idiot oil lover. Sickening. The other commenters are correct. A disaster waiting to happen

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Bahama7 3 months, 4 weeks ago

Hello Porkie - I hope you are well dear boy.

With the hotels empty, unemployment sky high and a mountain of debt this venture by BPC now looks mission critical.

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Porcupine 3 months, 4 weeks ago

Yes, may as well legalize prostitution, child labor to bring a few more dollars into the household and perhaps we can continue to sell votes, maybe officially now to raise some money for government. Sad to see people who can type, but not think. Mission critical to whom? Obviously you are a complete stranger to science. Climate, mass extinction, cancers, all helped along immensely by your "mission critical". You are probably a great businessperson. Screw everyone and every thing, so long as a few dollars flow into your pocket while the rest of humanity suffers. Business as usual. Backwards thinking seems to be the norm now. Thanks for helping it along.

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Porcupine 3 months, 4 weeks ago

Where are all your other comments on things pertinent to the people of The Bahamas? No opinion, no concern? Just oil, hey?

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bogart 3 months, 4 weeks ago

While it may have allegedly been stuck in the 70's ....some 50 years ago, there must be concerns on the 50 years now of the rising temps...more hurricanes happening within hours...more fiercer hurricanes...Category 5 hurricanes and hovering for days roughly same spot. So what are the controls to stop any pollution, spills etc. to any damages to Bahamas, Cuba, Florida Cays, getting into ocean stream going up US coast?

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Proguing 3 months, 4 weeks ago

The whole world is shutting down oil wells and at the same time in the Bahamas we want to drill for oil? The whole world is moving away from oil with electric vehicles. And some people think we are still in the 70s. Apart from the executives of this company, nobody will benefit from this venture.

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avidreader 4 months ago

Perhaps the ruins of that test oil well drilled in the middle of the Cay Sal Bank back around 1958 is still indicated as a hazard to navigation on nautical charts. For those who may be geographically challenged, the Cay Sal Bank sits off the north coast of Cuba roughly midway between Andros and the Cuban coast. I have to assume that the results of the test well were not encouraging. Be that as it may, it is undeniable that the discovery of oil has led to great prosperity for some nations and great suffering for others. Oil wealth can be used to enrich an entire nation or it can be squandered in orgies of corruption or wars.

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banker 3 months, 4 weeks ago

The further that you get away from mainland Cuba, the less the oil and the more sulphurous it is. By the time you get 60 miles offshore, there ain't no more oil north of Cuba.

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DWW 3 months, 4 weeks ago

$1 a barrel has nothing to do with it right... ;)

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