The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamas-based oil explorer’s search for a joint venture partner has been given “fresh impetus” by the Government’s extension of its four licences until end-2020.

Simon Potter, Bahamas Petroleum Company’s (BPC) chief executive, told Tribune Business yesterday that the Minnis administration’s confirmation of the extension had given both itself and potential joint venture “farm in” partners “a clear line of sight” towards the execution of a first exploratory well in Bahamian waters.

Speaking after BPC received “formal notification” from the Government, Mr Potter said it gave the exploration outfit a “level of clarity we’ve not had over the last few years” while providing “a good window” to design “a safe and environmentally responsible” well.

The government’s licence extension confirmation effectively gives BPC a clear two-year window in which to complete everything required for the drilling of a first exploratory well in waters south-west of Andros, near the maritime border with Cuba.

It provides BPC and any joint venture partner - especially in a business reliant on government regulation and approvals - with the certainty and clarity they crave to proceed with their plans, knowing that the “rules of the game” have now been set.

And BPC’s Friday announcement to shareholders and the markets, which produced a bump in its share price to £1.60, also revealed that the Government’s communication addresses more than just licence extensions.

For it also requires BPC and the Government to develop a two-year “road map”, or work schedule, setting out how all technical and environmental issues likely to be encountered on the way to that first exploratory well will be dealt with. This includes BPC obtaining all required “environmental authorisations”.

Both parties must also work together to “reconcile” the licence fees paid by BPC to-date, including during the “period of disruption”, with those sums that will be owing to the Government during the upcoming period to end-2020.

The “period of disruption” refers to the time when BPC’s progress was essentially halted as it waited for the former Christie administration to pass legislation to strengthen the regulatory and environmental protection regimes for oil exploration - an objective that was eventually accomplished.

Mr Potter told Tribune Business that BPC “has not been sitting on our hands” during the wait for the government to extend its four licences to December 31, 2020, as it had been working to further bolster its chances of success and identify “the optimal location” for its first well.

BPC is now working on two parallel tracks and objectives - securing a joint venture partner to share the financial and technical burden of that first exploratory well, while also obtaining all the necessary environmental approvals from the government under a process it triggered last April. The licence extension now gives it a clear timeframe in which to complete these goals.

“This announcement will give fresh impetus to any discussions that are ongoing,” Mr Potter told Tribune Business of the impact on “farm in” negotiations. “It gives them [potential partners] a clear line of sight.

“That’s a level of clarity we’ve not had over the last few years. It’s part of the sensible approach the Government has adopted here, laying out a clear path for two years, and that can only be good for ensuring the partners we get are top-notch.”

He added that the two-year “road map”, or work schedule, would allow BPC and the Government to fully assess the technical and environmental risks from drilling an exploratory well while also “understanding the resource potential that could be in the waters of the southern Bahamas”.

With BPC having already completed its geological studies, Mr Potter said of the wait for the licence extensions: “We haven’t sat on our hands. We have taken the opportunity to narrow the geologic risk, the technical risk as much as possible and ensure we pick the optimal location and maximise our chances of success.

“There’s oil there; it’s the extent to which it’s there in commercial quantities. That’s about using our data and the $100m we’ve spent to date, and using the seismic data we have to put the well in the right place.”

Mr Potter conceded there was “still a lot of work to do with the Government to ensure we get the complete environmental authorisation” to proceed, with BPC having applied for such approval from April 2018.

Pointing out that BPC had completed an Environmental Impact Assessment (EIA) from 2012, he suggested this process was off to “a very good start”, but the oil explorer still needed to produce an Environmental Management Plan (EMP) setting out how it plans to prevent, mitigate and respond to the risks identified by the EIA.

The Minnis administration has hired Black & Veatch, the environmental and oil industry consultant that analysed BPC’s EIA, to help review the EMP and all other material related to the environmental authorisation.

“We’ve always maintained it would take two years to plan the well and get the necessary government authorisations in place,” Mr Potter said. “What we’ve agreed with the Government is a two-year implementation window; that’s a good window in which to get and safe and environmentally responsible well done.

“There’s been a certain level of disruption over the licence terms over the last few years, with regard to the introduction of a modernised and strengthened regulatory regime the previous government put in place. We’ve taken the opportunity to speak with the Government over the last few months to work out a schedule to get a safe and environmentally responsible well done.”

The BPC chief added that the licence fee “reconciliation” would effectively allow both sides to put the issue “to one side” and work it out “in the course of time”, enabling the oil explorer to focus on exploratory well design and the accompanying technical/environmental work.

BPC, in its Friday statement to the markets, said it had “received formal notification from the Government of The Bahamas..... confirming that the (current) second exploration period of the [four] licences is extended until 31 December, 2020”.

“The notification received is in response to BPC’s request for clarification from the Government as to the term, timing of and work obligations pertaining to the licences, in view of time disruptions outside of the control of the company since 2015. The notification provides clarity and certainty to all parties as to the tenure of the licences,” BPC said.

“The company’s obligation during this second exploration period is to safely implement an environmentally responsible exploratory well. At the conclusion of this period, based on the results of the initial exploration well and in accordance with the existing terms of the licences and the pertaining regulations, the company will have the option to apply for a production lease over all or part of the licence area, and/or extend the licences into a third exploration period and/or apply for an appraisal extension.”

It added: “The notification received from the Government also stipulates that the Government and BPC must in the coming months agree a forward work programme for 2019 and 2020 and a reconciliation of licence fees already paid, including during the period of disruption, with any future licence fees due up to the end of 2020.”

Mr Potter said in a statement: “The confirmation from the Government of The Bahamas that the current term of our four southern licences extends to 31 December, 2020, provides the company with a certainty of tenure over the company’s licences, replacing any perceived ‘above ground’ issues with complete clarity in fact and law.

“This position has been arrived at following extensive government consultation and, whilst this has taken the company a while to establish, there is now a very clear two-year window to advance plans for - and to drill - an exploratory well, providing certainty to potential partners as we move forward in our farm-out discussions. Today’s news will add considerable impetus to this process.”