The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamas-based oil explorer yesterday said it is “ready to deliver” on a 14 year-old promise after confirming it will drill its first exploratory well in Bahamian waters in April 2020.

Simon Potter, the Bahamas Petroleum Company’s (BPC) chief executive, told Tribune Business that the name chosen for the well, Perseverance One, expressed “the sentiment we feel” after beginning its exploration efforts in earnest in 2006.

Describing BPC as being “very much in the action phase” on its first well, which it will spud in waters south-west of Andros near The Bahamas’ maritime boundary with Cuba, Mr Potter reiterated that the company’s activities will be “transformational” for the Bahamian economy and government revenues if it succeeds in discovering commercial quantities of oil that are extractable.

However, given the 45-60 day nature of the exploratory well activities, Mr Potter said opportunities for Bahamian businesses and employment would be “kind of limited” to consultancies and “minor contractual roles” at this stage. He pledged, though, that “many Bahamians” will be trained for roles in the sector if sufficient oil volumes were discovered.

Mr Potter also voiced optimism that all the necessary government approvals to permit BPC’s activities will be received in time for April 2020, even though it continues to work on arguably the key one - the Environmental Authorisation (EA) - with the Ministry of the Environment, Bahamas Environment, Science and Technology (BEST) Commission and their advisers.

Speaking after BPC firmed up its April 2020 well-drilling date, Mr Potter said the name had been chosen by the company’s late chairman in 2011. “I think it’s the sentiment we feel,” he told Tribune Business of the Perseverance name.

“We’ve believed in this technical prospect for many, many years. We’ve stuck at it, and spent a lot of time on this. It’s almost a truism, and we’re ready to deliver on it. It’s something where we feel we have a very good technical chance. We’ve been talking about it for quite a long time, and we’re very much in the action phase on this. People are very busy on this to ensure it’s ultimate success.”

The Perseverance One well will be 100 percent owned and operated by BPC following its successful raising of some $25m, which will fully cover all associated costs. Results from the exploratory drilling, which will take place at the northern section of an area covering 400 square kilometres, are expected to be available during the second quarter 2020 which ends in June.

BPC added that there was an equal 50 percent (P50) probability of gaining more or less than the target barrel of oil volume. “The target P50 prospective recoverable oil resource at this location is 0.767bn barrels, with an upside of 1.444bn barrels (assuming the same recovery factor), and downside volumes approximating to the minimum economic field size at currently prevailing oil prices,” it said.

“This location has been chosen, based upon high resolution 3D seismic data, as the best balance of lowest technical risk, geological conditions and recoverable volumes...In aggregate, the entire structure extends for between 70 and 80 kilometres along strike and accommodates over 400 square kilometres of mapped closure, with the entire structure having a combined most likely potential resource of in excess of 2bn barrels.

“Perseverance One will be located in water approximately 518 metres deep, with a target depth of 4,822 metres, but with a capability to be able to reach 5,600 metres, thereby affording the ability to evaluate multiple reservoir horizons...... The ultimate decision on well depth will depend on real-time drilling results and geological information.”

Mr Potter yesterday said the well design was “essentially complete”, with the main contractors, Halliburton and BakerHughes GE, “integrated” with BPC’s operations. It has opened an office in Houston, a key global hub in the oil exploration industry, to be closer to suppliers and contractors, and is due to physically inspect the drilling rig “shortly”.

Contracts with all third-party providers are now being finalised, and BPC said: “In parallel, the company has placed long-lead orders for casing and drill bits, and will shortly be finalising contracts for the provision of supply vessels and helicopter services to the rig following an extensive tendering process.

“The Company has appointed AON as its insurance broker, is in receipt of a number of quotes and is currently working through these with AON ahead of finalising an appropriate package of insurance policies for the intended drilling campaign.”

Mr Potter, disclosing that BPC was moving to ensure “every hour is productive” when it comes to drilling, said opportunities for Bahamian involvement would not be extensive at this stage. “It’s kind of limited to consultancy and minor contracting roles for services and environmental work at this stage,” he told Tribune Business.

“The well will itself be there for between 45 to 60 days, and is a temporary facility. Most of the skills and contractual services are very specialist and don’t widely exist in The Bahamas. That’s not to say that in the event of success there won’t be an education and training programme that will see many Bahamians trained to participate in this industry, but we need to establish discovery of sufficient volumes of oil first.”

Mr Potter expressed optimism that BPC would receive the necessary EA approval in time, adding: “We’ve been working very well with the Government, the BEST Commission and their independent advisers, Black & Veatch.

“Our first submission was made in 2012, the next in 2018, and the most recent ones in 2019 and again in 2020. Black & Veatch responded to a number of so-called gaps - differences between our approach and technical norms and procedures.

“We’ve been working to an agreed timetable to close those gaps, and everyone has been working very well together. We’re progressing discussions with the Government and BEST Commission, so remain confident we’ll receive the appropriate approvals.”

Mr Potter said there would still be “a way to go” between discovering commercial quantities of oil and their extraction, although any positive results from BPC’s activities would confirm the presence of an asset that could act as security for the Government’s borrowings.

He added that the royalties agreement, which ensures the Government gets a percentage of each oil barrel’s revenue, effectively made it an equity partner with BPC and would provide an additional revenue stream for the cash-strapped Public Treasury.

“I must emphasise this is exploratory,” Mr Potter told Tribune Business, “but in the event of success this could be transformational for the Bahamian economy. There’s quite a lot of water to flow under the bridge for that to happen, but this is the first step in proving there’s another industry in The Bahamas that could add significantly to the economy.”

He added in a statement: “BPC is in the final stages of readiness for the commencement of drilling our initial exploration well, Perseverance One, in The Bahamas, with results from the well expected in the 2020 second quarter.

“Perseverance One has the potential to open a world class, new frontier basin offshore Bahamas, less than 200 miles from the world’s largest hydrocarbon market/infrastructure. In our view this makes Perseverance one of the premier prospects that could be drilled globally this year with the potential to not only fundamentally alter the status of BPC in the market, but to also transform the revenue generating capacity of the Bahamian economy.”

BPC also said discussions with potential joint venture partners continue, but their outcome will not affect the exploratory well plans or timing.