The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

THE Government is said to be "embracing" a potential $4.5 billion oil storage terminal and refinery planned for east Grand Bahama, Tribune Business can reveal.

Details of the Oban Energies project are buried in a recent presentation by the Central Bank of the Bahamas, which describes a $1.5 billion first phase investment in a 20 million barrel, "multi-purpose" bulk storage facility for petroleum products.

The development, which is expected to be completed in 2021, also involves a 250,000 barrel per day oil refinery. This represents the potential return of oil refining to Grand Bahama, and means Oban is envisioning a grander project than the existing Buckeye Partners-owned BORCO facility.

Tribune Business sources last night confirmed that Oban Energies has been working on obtaining the necessary permits and approvals for its development, which appears to be located outside the Port Area in east Grand Bahama.

It is unclear how far the group has progressed, but its inclusion in the Central Bank's September monthly economic developments report indicates it must be progressing.

Oban Energies' website shows it has hired Bahamas-based Islands by Design, headed by Keith Bishop, as environmental consultants, while another Bahamian entity listed is the Mosko Group, which will likely perform engineering and construction functions.

Oban Energies certainly seems confident of receiving the Minnis administration's approval, stating on its website: "With a current shortage of liquid bulk storage locations in the Caribbean, this project is being embraced by the Bahamas government as providing needed services, employment opportunities and economic growth.

"Following the lifting of the 40-year crude export ban in December 2015, the US could become a major exporter of light oil, providing long term value to Oban. Our relationship with the Commonwealth of the Bahamas started with a vision for meeting the energy needs of the Bahamas and the surrounding area."

Referring specifically to its Grand Bahama project, the Palm Beach Gardens-based Oban added: "With a location just 90 miles (145 kilometers) from the US eastern seaboard, this complex is ideally suited as a merchant facility for storing and blending liquid products, transshipping and terminal operations for the Arabian Gulf, West African and Northwest European trade to the US' east coast and the Gulf coast, as well as for North American trade to Europe, Latin America and the Pacific. Total capital required for the development is $4.5 billion over four years."

Oban Energies' website indicated it will adopt a phased approach, saying: "Phase One requires a $1.5 billion investment for development, construction and start-up operations. The project will provide storage tankage for crude oils, residual fuel oils, middle and light distillates, specialty vegetable oils and heavy oils, and will consider all other bulk liquid storage requests.

"The Project will launch with an initial capacity of four million barrels, with plans to expand capacity to 20 million barrels by year four of facility operation. In addition, Oban Energies will construct a 50,000 barrel per day petroleum refinery, with plans to expand to 250,000 barrels per day by year four of the facility operation."

Given the scale of Oban Energies' project and associated investment, it represents a huge boost for the Bahamas - especially Grand Bahama's struggling economy - should it come to fruition.

Construction and full-time jobs are likely to be in the hundreds, while valuable spin-off benefits are likely to be created for a wide range of Bahamian companies and entrepreneurs. The project could reverse Grand Bahama's economic decline, stemming from its depressed tourism product, and fits in well with the island's existing industrial base.

However, the area selected is likely to raise environmental concerns, especially given the nature of Oban Energies' investment. It also raised fresh questions about the Carnival cruise port project, approved by the former Christie administration for the same area, amid suggestions the Government wants to relocate it nearer to Freeport - and possibly the original Williams Town site.

Oban Energies described the project site as "east of Freeport along the Northwest Providence Channel". Its storage facility is designed to facilitate the transfer of crude oil and other products to smaller vessels, which will then transport them to shallower ports in the US.

Explaining the project's rationale, the group said: "The Caribbean is made up of relatively small islands with small ports. There are limited sizes of liquid bulk tanks, making logistics with small vessels and delivery complicated and expensive.

"As demand for fuels has increased, there has become a great need for large volume liquid bulk storage terminals as strategic hubs with high throughputs for the suppliers of various products."

Oban Energies pointed out that BORCO was already engaged in similar work, such as storage, bunkering and blending. It added that Grand Bahama was already "a holding area for forwarding crude oil deliveries to North America, and a 'break-bulk' point for transshipment operations".

Meanwhile, the oil refinery will be "designed to process less expensive heavy crude, with the flexibility to process opportunity crude, as dictated by market economics. The refinery will be designed to fully upgrade heavy sour crude oil and produce quality products in order to address premium markets for oil products".

"The Bahamas is an excellent location for higher netback product sales to the US, since the Bahamas is exempt from US product import duties as a member country under the Caribbean Basin Trade Partnership Act," Oban Energies said. "The location also provides the ability to compete in opportunity markets in Europe and the Caribbean Basin.

"The storage market is large - more than 500 million barrels in the US - and demand is growing as available storage capacity is declining. The market for storage of petroleum/liquid product and distribution products is large and growing, but is lacking sufficient capacity and state-of-the-art facilities with best-in-class location or management."

Oban Energies president is Satpul Dhunna, who is described as a financial investor and adviser, having held numerous posts in the corporate finance world. Russell Erickson is the group's senior vice-president, while its finance chief, Mark Michel, is said to be a former US Navy SEAL and "former advisor in the White House Situation Room, where he provided current intelligence to President Obama".