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Oil explorer: 'We will pay double required royalties'

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Simon Potter

* BPC chief: 'We're looking to get on with job'

* Aiming to settle outstanding licence fees

* Consultants to be posted on drilling vessel

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamas-based oil explorer yesterday said it will "pay double the royalties that the law provides for" to the Government should it strike success when exploratory drilling starts in less than a month.

Simon Potter, Bahamas Petroleum Company's (BPC) chief executive, speaking before the threatened legal challenge by environmental activists emerged (see other article on Page 1B), told Tribune Business that the company and Bahamian government will enjoy an equal 50/50 share of any proceeds should it discover commercial quantities of oil in this nation's waters.

Asserting that BPC's activities could produce up to a $5bn revenue windfall for the Government over the project's 10-20-year life, depending on the volume of oil found beneath the seabed, he reiterated the "tremendous difference" this could make to an economy afflicted by the ravages of COVID-19.

With BPC yesterday revealing that the Stena IceMAX vessel hired to drill its Perseverance One exploratory well is poised to leave the Canary Islands for The Bahamas by November's end, in preparation for a December 15, 2020, operational start, Mr Potter told this newspaper: "We're looking forward to getting on with the job we've been trying to do for the last ten years.

"The royalty structure is embodied in law and the licence. The law establishes a royalty that we have to pay for the production of oil and gas, and the licence we signed provides more royalties on top of that.

"It doubles the amount of royalties we'd pay under the law. We agreed with the government many years ago to pay more royalties than the law provides for. Depending on the volume of oil it could double the royalties."

BPC’s existing commercial terms with the Government involve a ‘sliding scale’ of royalty fees, with the rates tied to production (the daily volume of oil, measured in per barrel terms) that is extracted from Bahamian waters.

The royalty rates range from a low of 12.5 per cent for 75,000 barrels per day to a peak of 25 per cent for 350,000 barrels per day or more, with a production licence granted for 30 years.

And, using a market price of $80 per barrel of oil, BPC has said that once production costs - equal to around $40 of this sum - are taken out, the remaining $40 would be "split 50/50 between us and the Government".

While the discovery of commercial oil quantities remains an 'if', with much now depending on the results of BPC's exploration activities, Mr Potter again defended royalty rates and terms which have come under fire previously from some observers who believe they provide too little to the Bahamian people.

The BPC chief, who previously told this newspaper that the payments it faces are “30 per cent higher” than those paid by Gulf of Mexico oil drillers, pointed out that the company had taken on all the risk by investing more than $100m to-date just to reach the well-drilling stage without the Government parting with a single cent.

And, given that The Bahamas is effectively 'virgin' oil exploration territory, with no well dug for more than 25 years, Mr Potter said comparisons with the rates paid in established oil producers such as Trinidad & Tobago were not like-for-like.

"There's no financial risk to the Government," Mr Potter reiterated. "We have to bear the contributed capital burden of exploration, appraisal and development. That's the business we're in. We understand the rules of the game, and it's important to establish the rules of the game beforehand.

"That's the contract we signed with the Government. They contracted with us to explore, they contracted with us to drill a well, and in the event of success the Government and ourselves know who is getting what."

BPC, in its statement yesterday, said a successful Perseverance One strike will "substantially de-risk" a structure that extends for between 70 and 80 kilometres below the seabed, "has a mapped areal closure of over 400 square kilometres, and has a 'best estimate' aggregate recoverable resource potential in excess of two billion barrels".

"Perseverance One is a potentially basin-opening well, with the kind of scale and associated value uplift exposure rarely offered outside of oil majors," Mr Potter argued. "At the same time, our activities, in the event of success, have the capacity to be economically transformative for the nation of The Bahamas, and could ultimately contribute billions of dollars in royalty revenues to the national treasury at a time when the dual impact of recent hurricanes and the COVID-19 pandemic has been especially hard-felt by most Bahamians.

"Many other nations in the region such as USA, Mexico, Trinidad and Tobago, Suriname and Guyana have over the past decade safely and responsibly drilled offshore wells, developed or continue to develop offshore hydrocarbon resources, and reaped the economic benefits of an established or a whole new industry. Moreover, these other nations have been able to do so at the same time as seeing growth and development of existing industry sectors, such as tourism."

Mr Potter told Tribune Business that BPC's efforts could produce "$5bn in revenue over the 10-20-year life of the project depending on the volume we find", and added: "This is a resource to the nation, and could make a tremendous difference to the revenue base of the economy and generate significant revenues over the life of the project.

"With the economy struggling it could be a huge help to many and all Bahamians. What a difference it would be if we established this as a resource base for the economy."

Mr Potter added that BPC was still working with the Government to resolve the licence fees payable for its second exploration period. "We're still in discussions, that's the best thing to say there," he said.

"I think it's one thing we'd like to get settled. We've paid licence fees in advance in good faith in the last few years although we've been unable to further activity with the licence. But it's our obligation and we're prepared to stand up."

BPC yesterday said the Perseverance One well, which will be drilled in waters some 90 miles to the west of Andros, close to the maritime boundary with Cuba, is "targeting recoverable prospective resources of 0.7 billion barrels of oil, with an upside of 1.44 billion barrels".

With the Royal Bahamas Defence Force and US Coastguard briefed on the drill ship's operating and safety procedures, the oil explorer added that the Department of Environmental Planning and Protection has now been briefed on the precise well location as well as having issued further unspecified approvals.

To provide further environmental safeguards, BPC said officials from Black & Veatch, the US-based consultants that assisted the Government with assessing the company's applications, will be present on the drill ship to provide a further layer of oversight during the 45-60 day drilling period.

"The well site is located within the Santaren Channel, a deep-water seaway that is already a major oil transhipment thoroughfare through which oil super-tankers pass daily carrying millions of barrels of crude oil to oil facilities in The Bahamas and beyond," BPC said

"The Bahamas is already a significant player in the international oil industry, home to some of the world's largest oil storage facilities. The Perseverance One well site is located more than 90 miles from the nearest inhabited Bahamian islands, and over 40 miles away from the nearest uninhabited Bahamian islands...

"In accordance with the requirements of BPC's licences, BPC has formally notified the Bahamian Department of Environmental Protection & Planning (DEPP) as to the precise well location, as well as the specific details and technical specifications in respect of the Stena IceMAX drill ship, and has obtained the DEPP's consent to same," it added.

"BPC is currently working with the Government of The Bahamas' appointed third-party expert adviser, international environmental consultants Black & Veatch, on a number of technical items relating to the Perseverance One drilling programme.

"As agreed with the Government of The Bahamas, one or more Black & Veatch experts will be stationed onboard the Stena IceMAX during drilling operations, and will oversee the entire drilling programme, with a specific mandate to observe and report on specific tasks, activities and operations, including observing the baseline seafloor survey and testing of drilling fluids to ensure compliance with mandated safety requirements; oversight of environmental compliance activities during drilling activities and thereafter during decommissioning and abandonment activities; and monitoring drilling practices, procedures and activities to assure compliance with the Environmental Impact Assessment (EIA) and Environmental Management Plan (EMP)."

Comments

TalRussell 1 year, 8 months ago

Why some see be's more of a Sludge-oil driller with a briefcase?
Shakehead once for upyeahvote sure could've almost fooled this colony's comrade, why not a UK operator,twice for not by definition more of an across the Pond, English?** Is I makin' sense?

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TalRussell 1 year, 8 months ago

My Comrade, my brain operates more off of a special circuitry, than most.

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Clamshell 1 year, 8 months ago

Uh ... the current market price of a barrel of Brent Crude oil is $39.25, and Mr. Potter says their production costs are $40 a barrel. So if they were drilling and pumping oil today, they would be LOSING money on every barrel. Pretty hard for the Bahamas to earn $5 billion that way, LMAO.

Mr. Genius Business Editor Neil Hartnell coulda looked this up and figured it out. But ol’ Neil would rather just write down whatever horseshyte these “big important business execs” tell him. Stupid toadie.

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B_I_D___ 1 year, 8 months ago

Hasn't been above 80 a barrel in over 2 years...They had a small bubble/peak through the first half of 2018, but for the most part it's down around 60...or less.

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DWW 1 year, 8 months ago

THE OCED cartel is broken. The saudis don't care they want to continue their lifestyle and will pump till the cows come home. Russia doesn't play well with others anyway and is in the sand box with Venzuela. meanwhile the US and canada are like 'hey guys we need to stop pumping so we can artificially drive up the price to make it profitable'. Oil price is very unlikely to rise above a profitable margin for a while unless the USA organizes a few choice coups and assassinations to cut production overseas.

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Proguing 1 year, 8 months ago

The price of oil will be much lower in ten years when petrol cars will be banned in Europe and America in favor of electric cars

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Voltaire 1 year, 8 months ago

What is this nonsense? There ARE no required royalties for the Perseverance 1 oil well. It is an exploratory well and they already said it will be immediately capped. It is just being drilled to 'prove' oil is there. They will extract no oil, and so they will make no profit, and so they will pay no royalties. The double of zero is zero. Simon Potter is promising to give us zero! That may be the most revealing thing a BPC executive has ever said.

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TalRussell 1 year, 8 months ago

My Comrade, at very least, even a fake OBAN mustered up the courage to hold a Town Hall meetin' supposedly for FREEporters. What exactly, did a fake OBAN talk about at the Town Hall - lots more of fake sgi#, Wasn't the recoats Freeport senator, not a front and center supportin' cheerleader for all stunts put on by OBAN? Presley!

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realitycheck242 1 year, 8 months ago

agreed, the Stena IceMAX vessel is a drill ship. A oil rig will be required long term oil extraction.

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proudloudandfnm 1 year, 8 months ago

It'll be capped until a rig arrives to start pumping....

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TalRussell 1 year, 8 months ago

Is it the correct conclusion that the first permit granted drill in search sludge oil can reach 284 miles across some bluest sea waters be found anywhere in the world? Told by astronauts, how such beauty had shut off need artificial oxygen to be breathing in off colony's sea waters oxygen all way from outer space.

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SP 1 year, 8 months ago

"Trusting" the government with its track record of failure, under the table dealing with our assets, and natural resources is not an option.

The government and Bahamas Petroleum Company should be made to table all documents relating to oil exploration for public scrutiny. If everything is above board this should not be a problem for them.

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TalRussell 1 year, 8 months ago

Comrade SP, didn't we tried that with the OBAN documents but even the newest Chief Royal Constabulary, remains at a loss now into year number two since the OBAN documents, supposedly went missing? The recoats senator for Freeport, ducked out when just was asked, precisely the same question just days ago - what's OBAN been up to during 2020? Maybe opportune preppin' general election time dig into all direct-indirect costs related to OBAN to date out the colony's PopoulacesPurse? Why am I keep hearing the sum being $3 to $6 million?

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bahamianson 1 year, 8 months ago

Plus national basic income. Give every bahamian family $1200 per month for the rest of our lives. Our standard of living can increase.

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TalRussell 1 year, 8 months ago

Been lifetime advocate Universal Minimum Income.

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thps 1 year, 8 months ago

Let's try to first pay the water company on time.

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thps 1 year, 8 months ago

good thing we stopped putting plastic bags in the ocean. it would have made finding the X for tor the oil well that much harder.

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TalRussell 1 year, 8 months ago

But my comrade, plastic bags have been replaced with scalin' down what amounts buy of Grocer Rupert's groceries and rolls toilet papers go into the Cloth Sacks.

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thps 1 year, 8 months ago

Can anyone say if drilling for oil is less of a risk than releasing balloons in the air.?

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ted4bz 1 year, 8 months ago

It’s impossible for this to not have cost us not a cent. Other than the operation the consultancy fees, research, securities, attorneys, marketing, administration, management, banking, investment and the works, everything to get this setup, going, rolling and running properly etc. It must have cost us a bundle already and that is without collecting a single penny. All that for sure without any anything guaranteed. So we can’t say this won’t cost us a cent, it will even if we don’t collect what we spend.

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TalRussell 1 year, 8 months ago

Comrade Ted, there's just not enough you out there to keep an eye out for someone politician, an official, or of special interests might out be doin' funny. Where there is free-wheeling cash there be's funny temptations**

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Porcupine 1 year, 8 months ago

"There's no financial risk to the Government," Mr Potter reiterated. " Really! How amazing. No risk. If that was the case, why does nearly every scientist in the world realize that the costs to life itself depends upon humanity to quit burning fossil fuels? The debate here in The Bahamas is stifled by those who can see only money. Just like at the web shops. Just like a good preacher, Simon Potter talks bullshit that he hopes will make sense to the believers.

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ColumbusPillow 1 year, 8 months ago

Dear Porcupine, where did you get the outrageous comment " nearly all scientists in the world... advising us to quit burning fossil fuels"? FYI no nation in the world can exist for long, without access to cheap energy ( fossil fuels) to support their current standards of living.

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proudloudandfnm 1 year, 8 months ago

10 to 20 years? 10 to 20 billion then.

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Bahama7 1 year, 8 months ago

Lots of revenue for the Government.

We should get an investment grade credit rating once the first cargo’s of crude are sold.

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Proguing 1 year, 8 months ago

Yep and all Bahamians will move to Lyford Cay

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tribanon 1 year, 8 months ago

This shyster Potter is doing his best to convince the fools among us that BPC's endeavours are the answer to all their hopes for a better life during these most difficult times. Sleazy criminal thugs like Sebas Bastian do the same thing when they tell you to support their web shops with your last dollar in the hope of a big numbers win to make your miserable life better.

Potter wants to continue conning and fleecing investors in BPC with our support while exposing us to great risk of the very costly destruction of our natural heritage - our environment. Bastian on the other hand wants to continue preying on those vulnerable to the very addictive disease of gambling, thereby destroying the lives of many Bahamian families with a serious toll on the overall fabric and well-being of our society.

These two men, Potter and Bastian, are evil alike to their very core and solely motivated by only one thing - money in their own pockets and bank accounts! Don't believe a word otherwise coming out of their lying mouths. Even in the Middle East where oil can be found in many places by just sticking a shovel in the ground, only a very few people in the select ruling class enjoy the wealth from oil while everyone else remains impoverished and, frankly, dirt poor.

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tribanon 1 year, 8 months ago

P.S.: And let's not forget that penny stock BPC, as a tiny minnow, is the furthest thing from the giant oil whales like Exxon-Mobil and Chevron. The oil titans had the financial means to insure and clean up any envronmental catastrophe that might have resulted from their exploratory activities. BPC on the other hand, has no such financial means, period. BPC simply cannot afford the kind of very costly insurance coverage that would be required to adequately cover the clean-up and restitution costs of a major environmental catastrophe in our territorial waters.

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realitycheck242 1 year, 8 months ago

HaHa .....where Banker gone ....he use to say ":i tell ya .... Aint no oil" .....

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Proguing 1 year, 8 months ago

I don't know why, but when I read this article I visualize Christopher Columbus givings trinkets to the natives...

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Voltaire 1 year, 8 months ago

Another anti-BPC group is taking up the fight to save The Bahamas. Bahama7, are you going to insult and abuse these young Bahamians too? - https://vimeo.com/480873129">https://vimeo.com/480873129

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