Even if it finds commercial quantities of oil in Bahamian waters, it would take Bahamas Petroleum Company (BPC) at least five years to start an oil industry in The Bahamas, BPC Chief Executive Officer Simon Potter revealed yesterday.
BPC began the drilling of its Perseverance #1 exploratory well on December 20 to determine the quantity of oil in The Bahamas’ southern territorial waters.
If the drilling of the exploratory well is successful, the company is projecting between 0.77 billion and 1.44 billion barrels of oil.
“It would take us five years to confirm the exploration potential, to confirm that the well will flow and then to put a production ship in operation,” Potter said during an appearance on radio talk show “Issues of the Day” on Love 97.5 FM yesterday.
“I think people have heard me say previously that at that point, it becomes cash for the company and the government.”
BPC has stated previously that The Bahamas stands to accrue $5 billion over a seven- to ten-year span should it strike oil in Perseverance #1.
Potter said should oil be found in commercial quantities, that would generate a huge payback for the government.
“It would see a huge payback for the company, but it’s the company that puts its funds at risk in doing the exploration, in doing the development, so to the extent that it doesn’t ultimately yield a commercial development, then certainly those funds are to the cost of the company.”
In a statement released over the weekend, in which BPC praised the government’s commitment to fast track the implementation of a sovereign wealth fund, Potter said if BPC were to find commercial quantities of oil, royalty payments would provide excess cash to “promote and safeguard” the well-being of Bahamians.
His comments came after Attorney General Carl Bethel said last week that the government is seeking to renegotiate its royalties agreement with BPC, since the current agreement would “shortchange” Bahamians.
The current royalty rate is between 12 percent and 25 percent of the net petroleum won and saved from the licensed area, significantly lower than the 45 percent and 75 percent of the net selling value advised by the Commonwealth Secretariat.
Potter continued, “We have an agreement between the company and the government. The law of The Bahamas embodies a royalty payment in respect to any oil or gas produced. Then in agreeing to our license with the government, what the company did was agree to a significant increase in the royalties compared to the law embodied in the license and so that agreement sits and was all negotiated at the time… between the company and the government.”
Potter also addressed and defended the company’s record of paying licensing fees.
“The company has paid its licensing fees over a number of years. We paid them in advance and as the AG has said we’ve made payments, we’ve offered to make further payments and it’s just the reconciliation that needs to occur,” he said.
“There are certain times when you don’t pay them and with the various on/off aspects of the license, it’s just that reconciliation that needs to occur as the AG himself has said.”
The exploratory drilling process is expected to take between 45 and 60 days.
BPC is also in the middle of a highly publicized legal battle with environmentalists, who earlier this month were granted leave for a judicial review against the government’s decision to authorize drilling.
The judicial review hearing is set for February 17 and 18.