The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

An oil explorer has pledged to complete its first exploratory well in Bahamian waters "well within the timeframe" provided by the initial three-and-a-half month licence extension granted by the government.

Simon Potter, the Bahamas Petroleum Company's (BPC) chief executive, told Tribune Business that the COVID-19-related extension to its licence and associated drilling obligations would likely be even longer given that the emergency sparked by the pandemic was continuing.

He added that the government's "formal notification" of the extension, unveiled to the markets last week, had provided BPC with critical "assurance" surrounding what he described as a "core asset" for both the company and, potentially, The Bahamas, should commercial quantities of extractable oil be confirmed.

BPC, which now bills itself as a "full cycle" exploration and production business following its recently-completed merger with Columbus Energy Resources, said the extension of its Bahamian licence had given it "sufficient certainty" to confirm that drilling of its exploratory Perseverance One well will start between December 15, 2020, and February 1, 2021.

"The company has received formal notification from the Government of The Bahamas that, on an interim basis, a 3.5 months force majeure extension to the second exploration period of the company's southern licences in The Bahamas has been granted such that the current term of those licences will now extend to at least mid-April 2021, and by which time BPC must have commenced well activities," BPC said.

"Given that the relevant force majeure event is presently continuing (namely, the impact of the COVID-19 pandemic, currently ongoing in both The Bahamas and in relevant international jurisdictions), BPC remains in constructive dialogue with The government as to the ultimate full extent of the force majeure extension.

"However, the interim extension to mid-April 2021, as now confirmed, is sufficient to provide certainty for the purposes of the drilling of Perseverance One, which is scheduled to commence in the window of 15 December, 2020, to 1 February, 2021."

BPC previously invoked the "force majeure" contract in its licence agreement, which deals with "unforeseeable circumstances" preventing one party from fulfilling the terms of a contract, after COVID-19 halted its plans to complete Perseverance One before the 2020 hurricane season. It had been seeking an extension until at least June next year, but is content with April 2021.

Referring to the Columbus merger's completion, Mr Potter told Tribune Business: "One of the pieces of that announcement was declaring to the market that the government had written to us with formal notification that, on an interim basis, they had granted us a three-and-a-half month extension to force majeure that takes the licence through to mid-April 2021."

Suggesting that the extension will ultimately be longer, given that the pandemic continues to rage, he added: "With the state of emergency ongoing, time is accumulating to that force majeure. The time of the force majeure adds to the licence. This is the government saying we will give you three-and-a-half months, but to the extent it is still going on, we will do the tallying up in the future."

With a confirmed contract for the oil rig in place with Stena Drilling, Mr Potter said BPC believed drilling in waters south-west of Andros, close to the maritime border with Cuba, would begin in the early part of the December 15-February 1 timeframe.

This, he suggested, would place completion of BPC's first exploratory well towards end-January or mid-February 2021, thus ensuring "the licence obligation will be fulfilled well in time for April" and the revised deadline. Based on a 45-60 day completion cycle, he added that Perseverance One would be finished by early April at latest assuming a February 1 start, still inside its obligations.

Describing The Bahamas' well as being "at the heart" of BPC's strategy, Mr Potter said: "It's a core asset of the company, and it remains our ambition to bring that to fruition. It [the licence extension] does give us that kind of assurance that we will get our obligations done well within the timeframe granted to us by our licence.

"We are absolutely single-minded in our desire to deliver the well in The Bahamas and evaluate the significant potential resource that sits there in the southern ocean adjacent to the Cuban border. People should be assured we're trying to make it happen, and make it happen as soon as possible rather than leave it to the last moment by having the rig contract making the rig available early."

Mr Potter reiterated that any commercial oil discovery would be "a significant asset" for The Bahamas at a time when its economy needed a major boost due to the COVID-19 fall-out. However, it is not just the Dorian-related spill at Statoil in Grand Bahama that has made many uneasy about permitting oil exploration in this nation's pristine waters and environment.

For Mauritius, another tourism-dependent economy possessing pristine beaches and abundant marine wildlife, is now grappling with the consequences of a major oil spill and environmental disaster after the Japanese-owned bulk tanker, MV Wakashio, ran aground on a coral reef three weeks ago.

BPC's exploration activities also come against the background of a report by climate finance think-tank, Carbon Tracker, which found that the world's largest oil and gas companies have wiped $90bn off the value of their assets in the past nine months as COVID-19 accelerates a move towards non-fossil fuels and renewable energies.

However, in response, Mr Potter told Tribune Business that BPC's exploration activities will be unaffected, since its activities "will come to fruition in the event of success in the middle of the decade", meaning that oil prices and demand in the mid-2020s - not now - will be key.

He added in a statement: "We are pleased to have received confirmation from The Government of The Bahamas of an interim force majeure extension to our southern licences, sufficient to ensure drilling can be completed consistent with the timelines contained in the rig contract with Stena Drilling, and in full compliance with the term and obligations of the licences.

"We are especially grateful to the Office of the Attorney General in The Bahamas for their collaborative approach to working with BPC, even whilst a state of emergency remains in force in The Bahamas."

However, BPC's oil exploration activities remain controversial with Bahamian public opinion split on the issue. Many observers continue to question whether the company is for real, while environmental activists and others fret about the impact any spill or pollution could have on the country's environment and tourism industry when it re-opens following COVID-19.

Environmentalists recently celebrated what they saw as a major victory as multiple Florida congressmen and women, including some close to the Trump administration, wrote to US secretary of state, Mike Pompeo, urging that he oppose BPC's oil exploration plans.

Others, though, argue that the economic crisis created by COVID-19 means that The Bahamas cannot afford to spurn the opportunity to discover whether commercial quantities of oil exist within its territorial waters given the potential positive impact this would have for the government's fiscal position and country overall.

However, "if" remains they key word regarding any prospect of discovery for the time being, with any prospect of economic diversification from BPC's activities still some way off regardless of whether oil is found.