The Tribune

• As BPC’s first exploration well strikes out

• Govt silent but explorer says not giving up

• Activists to persist with Judicial Review

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

“Ecstatic” oil opponents yesterday urged The Bahamas to “seize the moment” and impose a permanent drilling ban after Bahamas Petroleum Company’s (BPC) first exploratory well came up empty.

Casuarina McKinney-Lambert, the Bahamas Reef Environment Educational Foundation (BREEF) executive director, told Tribune Business that BPC’s failure to strike commercial oil quantities with its Perseverance One well had given this nation a chance “to choose sustainability over drilling”.

She argued that Bahamians, as well as the government, must realise “we have something really good going for us” in the country’s pristine environment and sustainable tourism and fishing industries that should never again be endangered by oil exploration or similar activities.

Ms McKinney spoke out after BPC, in an official statement, confirmed that drilling of its Perseverance One well in waters some 90 miles west of Andros has now ceased after “commercial volumes of oil have not been proven” at that location.

BPC, in a long release that portrayed the situation as the equivalent of a “glass half full”, said drilling to a depth of 3,900 metres had detected the presence of hydrocarbons but not enough to make it commercially viable at that site.

It added, though, that the Perseverance One well’s findings had made the “technical” case that commercial oil reserves may be located in areas covered by some of its four other licences and it was not giving up on The Bahamas just yet.

While the data collected from its exploratory drilling has yet to be reviewed and presented to the Bahamian government, as required by its licence terms, BPC indicated that there was sufficient justification to consider drilling further exploratory wells in addition to continuing the search for a joint venture partner.

The company considers the results from Perseverance One, notably the confirmation of migrated oil within the Aptian reservoirs, will significantly reduce technical risk for any future/further exploration in this new frontier province,” BPC’s statement said.

“In particular, BPC considers that the results from Perseverance One may provide a strong technical basis for renewed farm-in discussions, with a view to future drilling at other target locations within BPC’s licence areas.” This leaves open the possibility that BPC may resume exploration in other Bahamian licence fields.

However, the statement made clear that BPC’s short-term focus is now switching from The Bahamas to its recently-acquired prospects in Trinidad and Suriname, where it hopes to achieve production of 2,500 barrels of oil per day this year, plus its newly-acquired exploration rights off the Uruguayan coast.

Simon Potter, BPC’s chief executive, could not be reached for comment by either phone or e-mail yesterday, while Carl Bethel QC, the attorney general, referred this newspaper back to the oil explorer when asked about the way forward from here after Perseverance One was dry.

Asked whether the outcome gives the Government another opportunity to exit an arrangement himself, the Prime Minister and other Cabinet ministers all said it desperately tried to get out of, Mr Bethel replied: “I would rather not speculate on the Government’s position until so advised.”

BPC’s shareholders and the global capital markets, though, did not share BPC’s optimistic interpretation of Perseverance One’s outcome. The oil explorer’s share price on London’s Alternative Investment Market (AIM) fell by more than two-thirds, or 67 percent, in trading yesterday as investors reacted negatively to the failure to detect commercial quantities of oil.

The share price fell by 1.39 UK pence to close the day at 0.7 pence - representing seven-tenths of one pence, less than a full UK penny. Based on these prices and total outstanding shares of 4.704bn, Tribune Business calculations showed that almost £64m was wiped off BPC’s market capitalisation as a result. Some shareholders vented their anger, even calling for the Board and management to resign.

The company’s total worth fell from £96.893m to just £32.924m. Among the hardest hit will have been Bahamian investors who injected a collective $900,000 into an investment fund established for them last year by BPC, whose sole investment was to be the latter’s shares so that they could benefit from an upside generated by a commercial oil discovery.

That possibility has now become much more remote, although observers who backed BPC’s oil exploration activities will argue that yesterday’s events suggest The Bahamas has missed out on a desperately-needed economic game changer that could have helped mitigate - or even partially reverse - the public debt and financial blow-out produced by Hurricane Dorian and COVID-19.

Among the unanswered questions stemming from yesterday’s events is whether BPC will seek to renew its five so-called “southern licences” whose terms expire at end-June 2021. Mr Potter, in a December 11, 2020, affidavit filed in response to activist opposition, said the renewal application must be submitted by end-March 2021 and will depend on the Perseverance One results.

Given the outcome, that renewal must be in some doubt. And there is also the issue of whether BPC will persist with its legal demands for the environmental activists to lodge $200,000 as “security for costs” so that their Judicial Review action can move forward. It is also uncertain whether it will oppose the substantive case, given the lack of clarity over its future Bahamas activities.

Environmental activists yesterday indicated the Judicial Review challenge will proceed, citing the need for the courts to provide clear guidance on which permits and approvals future oil wells must obtain, and the processes they must follow.

Among the most critical issues to be determined are whether oil wells need to obtain site plan approval under the Planning and Subdivisions Act, and an excavation permit under the Conservation and Protection of the Physical Landscape of The Bahamas Act, as well as the application of merchant shipping laws and international pollution treaties.

BREEF’s Ms McKinney, voicing concerns about Perseverance One being properly capped, told Tribune Business: “We think there should be a permanent ban on offshore oil drilling in The Bahamas; it’s just too much of a risk. The more we learn about it, the more we find out about the risks.

“Now is the moment to say we have something really good going for us in The Bahamas. We have an incredible environment, and sustainable tourism and fisheries industries, and now is the moment to protect it.

“This is the time to put a permanent ban on oil drilling so that it’s not a possibility for the future. All the light that we’ve shone on this issue throughout this process just reinforces this is not the way forward for The Bahamas. “

Suggesting that tourism industries, marine protected areas (MPAs) and fish spawning grounds can “breathe a sigh of relief” now that Perseverance One drilling has ended, Ms McKinney added: “You can’t have have one without the other; the environmental and the economic side of things.

“We’re beyond that discussion of either the environment or the economy. Certainly in The Bahamas we have to have both.” Joe Darville, Save the Bays’ principal, described himself as feeling “fantastic, exuberant and ecstatic” upon hearing that BPC was sealing its exploratory well without finding commercial oil quantities.

“I don’t think we’re going to cancel or opt out of the Judicial Review,” he told Tribune Business. “There are other potential situations that have to be dealt with. I don’t think there’s any reason [for BPC] to be joining this action right now, and we may not have to come up with that $200,000 security for costs.”

Sam Duncombe, reEarth’s president, warned that oil exploration in Bahamian waters is not a dead issue. “This is a tiny, tiny reprieve for us but it’s not the end of the road by any stretch of the imagination,” she said of BPC’s announcement. “But for the moment we are ecstatic. That’s the best wake-up call I’ve had for a long time.”

Indeed, Mr Potter said the Perseverance One well results suggested that the potential for commercial oil discoveries now lie in its other presently-untapped Bahamian licence fields. “In a technical sense, the well successfully validated the existence of oil, seal and reservoir,” he said.

“Together, these factors verify the existence of a working Lower Cretaceous petroleum system and sequences of reservoir quality..., pointing to the overall hydrocarbon potential of other untested prospects captured by BPC’s extensive acreage holding. However, at the Perseverance One location the volumes of oil encountered are not commercial.

“Perseverance One is the first exploration well in The Bahamas for decades, and the data gathered from this well will prove invaluable in providing a modern analysis as to the regional potential of the petroleum system which, in our view, reduces technical risk for any future/further exploration in this new frontier province.

“The company will proceed to undertake a comprehensive evaluation of the data derived from the well, as we believe the results provide a sound technical basis for renewed farm-in discussions.”