The Tribune

• Ferreira: ‘I’d have rolled them out long time’

• Ministry checking if application received

• Legal liability issues to be debated today

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Cabinet minister yesterday said he would “not be very sympathetic” if Bahamas Petroleum Company (BPC) seeks to renew its oil exploration licences but the decision is not solely his to take.

Romauld Ferreira, minister of the environment and housing, told Tribune Business he was unable to give a definitive government position on the matter as his ministry was still checking to verify whether the oil explorer had formally submitted a renewal application.

However Mr Ferreira, who has ultimate ministerial responsibility for regulating BPC’s exploration activities under the Petroleum Act and accompanying regulations, said he had yet to receive confirmation such an application had been made.

BPC, in a statement on Wednesday, had confirmed it plans to renew its four exploration licences in the southern Bahamas before the March 31 deadline to do so. Yet Mr Ferreira suggested: “I suspect they only put that out there to try and raise funds on the stock market.”

Emphasising that he was giving his personal views, he added of any BPC renewal application: “I’m not going to be very sympathetic towards it, but that’s not my call..... I would have rolled them out long time. We wouldn’t have been down the road talking about this.”

Mr Ferreira’s comments imply that the question of whether to renew BPC’s licences, should an application be made, will be decided by the Prime Minister and Cabinet collectively.

He had previously not wanted to renew the licences BPC employed to drill its Perseverance One exploratory well in waters 90 miles west of Andros, but was forced to reverse course after receiving legal advice from the Attorney General’s Office.

This concluded that the government, rather than BPC, was responsible for the latter failing to fulfill its licence and well drilling obligations due to the long wait for the new regulatory regime, which ultimately ended when the former Christie administration passed the Petroleum Act and accompanying legislation in 2016.

As a result, Mr Ferreira subsequently argued that if the Minnis administration had failed to extend BPC it would have been “on the hook for hundreds of millions of dollars”, which would have further endangered The Bahamas’ already-struggling credit rating.

Suggesting BPC’s licences and agreements were legally watertight, and could not be broken without inflicting a further substantial cost on already-strained Bahamian taxpayers, Mr Ferreira told the House of Assembly last month that The Bahamas would have faced “far greater” liabilities had the Government blocked the well’s drilling.

While BPC fulfilled all its obligations under its existing licences, which included the drilling of that first exploratory well, it is unclear whether the Government is still legally bound to honour any renewal application or if it can escape serious financial penalties if this is rejected.

When this was put to him, Mr Ferreira replied: “I meet with my [ministry’s] attorney tomorrow (today) at 9am. I guess we’ll find out. They advise on all issues of liability and I have to defer to them. Not all legal opinions issued by the Attorney General’s Office I agree with when it relates to the environment. But I stay in my lane.”

However, one well-placed source, speaking on condition of anonymity, questioned whether the Government could deny BPC’s renewal application given that it had fulfilled all terms and conditions under existing licences that are due to expire on June 30, 2021.

“I don’t think it can arbitrarily be denied,” they told this newspaper. “That was the argument the Government made to the environmentalists; that it was too costly to get out of.”

Despite its Perseverance One well failing to strike commercial quantities, BPC on Wednesday signalled that the drilling data obtained - as well as interest from other companies in partnering with it - had given it sufficient confidence to move forward.

“Since the completion of the drilling of Perseverance One, the company has had discussions with industry counterparties in relation to a potential farm-out of its licences in The Bahamas, and is working to formalise an entirely new farm-out process. Consequently, the company intends to renew the four southern licences in The Bahamas into a third, three-year ‘drill or drop’ exploration period,” BPC said.

“The Perseverance No.1 well did not result in a commercial discovery. The company is, however, encouraged that the results from the Perseverance One well indicated the presence of hydrocarbons.” This, together with renewed interest from potential joint venture partners, means BPC is not giving up on or abandoning The Bahamas just yet.

BPC added that its first exploratory well was drilled on a seabed structure that is more than double New Providence’s size, with its licences covering some 3m acres. In effect, Perseverance One represented just one pinprick in a vast area, and the drilling results and data derived from that first well suggest there is the possibility of finding commercial oil quantities nearby.

Suggesting that deeper drilling may be required, BPC’s statement said it was now focused on integrating Perseverance One’s findings with existing data on its licence areas as well as resuming the search for a joint venture (farm-in) partner to share the financial, technical and operational risks associated with drilling another exploratory well in Bahamian waters.

“Given these technical results, since announcing the results of the well the company has had a number of discussions with industry counterparties in relation to a potential farm-out of the licences, and the company is now working to formalise and launch an entirely new farm-out process via Gneiss Energy,” BPC said.

“The farm-out will seek to introduce a funding and operating partner for the next stage of exploration activity in The Bahamas. The company is in the final stages of integrating the well information with its historical dataset and expects to commence the farm-out process upon completing this work in the coming days.

“Concurrent with the farm-out process, the company intends to exercise its right to renew the four southern licences into a third exploration period at the end of the current second exploration period (at the end of June 2021),” BPC continued.

“The third exploration period will last for three years, and will require a further exploration well to be drilled before the period expires, failing which the licences would be forfeited (’drill or drop’).”

The statement further indicates that the oil explorer will likely only drill another exploratory well in The Bahamas if it can secure a joint venture partner to help “monetise” its licence assets and provide some return on the $120m it invested in the run-up to Perseverance One.