The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Environmental activists yesterday urged the Davis administration to impose a total ban on oil drilling in Bahamian waters after an explorer confirmed it has still to settle outstanding licence fees due to the Government.

Rashema Ingraham, executive director of Waterkeepers Bahamas, told Tribune Business it was “embarrassing” that the former Bahamas Petroleum Company (BPC) had now moved on to more promising exploration territory in Trinidad & Tobago without first settling its debts to this nation.

Calling on Challenger to “acknowledge debts owed to all creditors”, she said: “It’s embarrassing to see that Challenger Energy Group who, after not finding commercial quantities of oil, are considering moving on to another Caribbean country without settling its debt to the Bahamian people.

“The Davis administration began its term with a strong platform when the Prime Minister spoke to the United Nations (UN), and that includes becoming a sustainable country knowing the effects that climate change has on small island developing states like The Bahamas.

“To show how serious we are about what we have experienced, and what we expect can happen, placing a permanent ban on oil drilling within our borders must be a strong point for the Davis administration. We should not contribute to an industry that is leading to our demise as an industry.”

However, the Progressive Liberal Party (PLP), while in opposition, indicated that it was more open to allowing oil drilling in The Bahamas than its predecessor.

Ms Ingraham spoke out after the now-Challenger Energy Group, in its 2020 full-year financial statements released yesterday, confirmed it has yet to settle the licence fees owed to the Government for past exploration periods. While the sum outstanding was not disclosed, it is thought to be several million dollars.

Challenger, affirming that itself and the former Minnis administration last year “agreed a process seeking a final agreement on the amount of licence fees payable for the balance of the second exploration period, blamed delays caused by the COVID-19 pandemic for both sides’ failure to reach an agreement.

“This discussion has been delayed owing to the State of Emergency declared, and ongoing business disruption caused by the national response to the COVID-19 outbreak in The Bahamas. However, subject to said confirmation, the company expects that an appropriate side-letter agreement will be finalised in due course,” Challenger said.

It added that it remains in talks with the Government over a three-year renewal of its four southern licences, which would include an obligation to drill another exploratory oil well in Bahamian waters within that three year-period.

“The group remains in discussions with the Government regarding renewal of these licences, and the level of licence fees which remain to be paid for the current period,” Challenger added. “On formal renewal of the licences by the Government, the key licence obligation for the new three-year period will be the drilling of a further exploration well within the licence area before the expiry of the renewed licence term.”

Eytan Uliel, Challenger’s new chief executive, told shareholders in his report that the company was hoping to secure “a major industry player” as its joint venture partner on another exploration well. He added that the oil explorer had delivered on its obligations to The Bahamas by completing the Perseverance One well over the December 2020-February 2021 period even though no commercial oil quantities were found.

“We all know the Perseverance One well did not result in a commercial discovery at that location. That is part of life in the oil and gas exploration business: No matter how much high-quality technical work precedes drilling, you do not know what resource lies beneath until the well is down,” Mr Uliel said.

“That said, there are many aspects of the drilling campaign which everyone associated with Challenger Energy should be proud of. In particular, we did what we said we would do. Despite many challenges and numerous setbacks along the way, we eventually drilled the well, thus meeting our core objective of testing the structures at the chosen drilling location......”

Looking to Challenger’s future in The Bahamas, he added: “It is worth noting that whilst Perseverance One may not have resulted in the commercial discovery we hoped for, a substantial amount of data and learning has been obtained from the drill. We are still integrating all of this information, but it provides encouraging support for the possibility of a deeper Jurassic oil play.

“As I have observed in other forums, we had hoped for ‘instant gratification’ with Perseverance One, which was not the case. However, it is important to remember that in our industry several exploration wells are often required before the potential of a frontier basin is unlocked, and based on what we have learned from Perseverance One, we continue to believe that our licences in The Bahamas are prospective.

“We have thus shifted our focus to the future of this project: Renewing the licences into a third, three-year exploration period, and securing a partner - ideally a large industry player - to provide expertise and capital for the next phase of activity.”

However, Challenger’s financials make clear that it needs another $15m in financing over the next 12 months to meet all its obligations with some of the bills incurred in drilling Perseverance One yet to be paid. “

“On March 24, 2021, the group reported that the final cost of the Perseverance One exploration well, following extensive drilling delays due to equipment failures and additional unforeseen costs relating to COVID-19 management protocols, was approximately $45m, representing an additional $10m than originally anticipated,” Challenger said. 

“The group has entered into a series of agreements with the suppliers to the well for structured payment plans over the course of 2021 in order to facilitate the orderly settlement of these liabilities.”

Challenger also reaffirmed it has relinquished its fifth and northernmost Bahamas licence, adding: “In June 2021, the group notified the Government of The Bahamas that it did not intend to have further discussions regarding renewal of the Miami licence area, against which capitalised costs totalling $0.4m are being held as at 31 December 2020.

“As this development represents a non-adjusting post balance sheet event, the group will impair these costs in full in the financial statements to 31 December, 2021.”