The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamas-based oil explorer is "entirely focused" on drilling its first exploratory well, while viewing the end of exclusive talks with a "major" industry player as "validation" of its work.

The Bahamas Petroleum Company (BPC), unveiling its financial results for the half-year to end-June 2018, painted the three-month exclusive talks as a positive despite the failure to conclude a joint venture agreement for their first well.

Pointing out that discussions with other potential joint venture, or "farm in", partners had restarted once the exclusivity ended on August 31, BPC's senior executives said the Bahamian - as well as international oil industry - environment had strengthened in support of the project.

Bill Schrader and Simon Potter, respectively BPC's chairman and chief executive, pointed to the Government's push for economic diversification - and especially the Heads of Agreement with Oban Energies for its $5bn oil refinery, even though this remains under a cloud and is being renegotiated - as signs that it supports a "domestic hydrocarbon" (oil) sector.

BPC also submitted its 'Environmental Authorisation' application for the necessary permits for that first well to the Government back in late April, and the company's financial statements said it was "in ongoing discussion with the Government in relation to the process by which the application will be progressed in a timely manner".

"Going forward, the Board remains entirely focused on seeing an initial exploration well completed," the duo told BPC shareholders, adding that the rise in global oil prices had strengthened industry demand and interest in exploration projects such as its own.

"The overall operating environment for the company has continued to strengthen during the period," Messrs Schrader and Potter wrote. "Globally, oil prices have risen considerably and, in The Bahamas, the Government has continued to indicate support for the development of a domestic hydrocarbon industry.

"For example, in its most recent budget statement, the Government endorsed a diversification of the Bahamian economy and an expansion of its revenue base to create more buoyant and resilient growth, with the Finance Minister referencing a ''Blue Economy' policy, seeking to maximise the economic potential of The Bahamas' oceans, including specifically "oil and gas production".

"Also, during the period, the Government sanctioned a large new refinery project on the island of Grand Bahama, and a new Liquefied Natural Gas (LNG) facility on the island of New Providence." The latter is a reference to the LNG facility that will be constructed to support Shell North America's power plant deal with Bahamas Power & Light (BPL).

BPC earned $1m in exclusivity payments from the unnamed "oil major" over a three-month period, and its top executives said the talks reflected the project's potential despite the failure to conclude a deal.

"The agreement ended effective 31 August, 2018, and the company has since resumed discussions with various parties, including a number of new potential partners," Messrs Schrader and Potter said.

"The company considers the willingness of a major international oil company to enter into exclusive negotiations, and to pay a substantial amount for that exclusivity, to be validation of the technical merits and strong potential of the company's project."

BPC needs a joint venture partner to share the financial and technical burden of drilling its first exploratory well, a project that will last for 90 days and cost up to $100m. It has been seeking a deal for several years to help finance the well, which is targeted for waters south-west of Andros near the maritime border with Cuba.

Mr Potter, in a separate statement issued yesterday, added: "The first six months of 2018 have been a busy period for the company. While the exclusivity agreement entered into with the major oil company was not extended beyond 31 August, 2018, the company is encouraged by their interest and willingness to pay a substantial amount to enter exclusive discussions.

"The company views this as validation of the technical merits and strong potential of our high impact project. The Board remains entirely focused on seeing an initial exploration well completed. With the support of our advisers at Macquarie, the sustained recovery in the global oil price providing further confidence to industry operators and investors alike, and the recent bolstering of the company's cash position, we are working hard to secure the investment needed to move this exciting project forward"

Attitudes towards BPC's project among Bahamians have been mixed. Environmental activists have been vehemently opposed, while others are sceptical over the project's merits and whether sufficient quantities of oil can be extracted from below the seabed to make it commercially viable.

The former Christie administration postponed a proposed referendum on whether to permit oil drilling in Bahamian waters until after exploratory wells were dug, and it was known whether commercial quantities had been discovered.