The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Environmental activists are urging the Government to "carefully scrutinise" any proposal by Challenger Energy Group to monetise its $150m investment in this nation via the creation of carbon credits.

Joe Darville, the Save the Bays chairman, responding to the former Bahamas Petroleum Company's (BPC) confirmation that it has offered such a plan to the Government as an alternative to renewal of its exploratory oil drilling licences, told Tribune Business: "All I could say at this point in time is that it seems to be a very strange notion or idea that they could search for oil and, if they find any, not extract it and request compensation based on carbon credits they have accumulated.

"I don't know why they would come up with this notion. I would say we would have to be extremely reticent, careful and scrutinise carefully any such venture relating to carbon credit accumulation being supported by any outside entity and based on the fact they could drill for oil but not extract any commercial quantities.

"We need clarity coming from our government, not from them, around the procedures put in place for any carbon credits sold internationally and traded." Mr Darville spoke out after the Davis administration confirmed to Tribune Business that it is "examining the merits" of the oil explorer's proposal to gain a return on its investment in The Bahamas via the use of carbon credits.

A spokesman confirmed it had received a proposal from Challenger Energy Group, the former Bahamas Petroleum Company (BPC), suggesting how it could "monetise" its assets in this nation via an alternative to extracting any commercial oil discoveries.

"They have written to us asking us to consider," the spokesman confirmed. "We are examining the merits of their request within the stringent environmental carbon credits framework." They responded after Challenger, in its just-released 2022 annual report, asserted it had proposed a "joint initiative" to the Government that would enable it to extract value from its Bahamas investment while avoiding much of the environmental-related controversy surrounding its oil drilling activities.

Eytan Uliel, Challenger's chief executive, told shareholders it was pursuing a "parallel" path in The Bahamas with the carbon credits initiative put forward as an alternative to the renewal of its four exploration licences for a three-year term that would involve the drilling of another exploratory well within this nation's waters during that time.

"In relation to the Company's licences in The Bahamas, we maintained ongoing dialogue with the Government of The Bahamas on two parallel options: The renewal of the licences into a third exploration period, given that we still see considerable long-term exploration potential in those licences, a joint initiative seeking to monetise those assets via an alternative approach based around carbon credits," Mr Uliel wrote.

And, in the same report, Challenger affirmed: "The group is the 100 percent holder of four conjoined exploration licences offshore in The Bahamas. The Perseverance One exploration well was drilled in the licence area in early 2021, and did not result in a commercial discovery at the drill location.

"However, a number of other structures and drill targets remain prospective across the licence areas, and the technical findings from Perseverance One indicate the potential of deeper jurassic horizons. In March 2021, the group notified the Government of The Bahamas of its intent to renew the licences into a third three-year exploration period.

"This renewal remains pending, and the group is engaging with the Government on the renewal process. At the same time, the group is engaging with the Government and various third-party consultants on a joint initiative seeking to monetise the asset via an alternative approach based around carbon credits."

No details were provided on how the carbon credits proposal would be structured. However, given that these credits would likely be an offset to the non-extraction of any further commercial oil discoveries in Bahamian waters, it would appear likely that further exploratory wells will have to be dug to confirm if such deposits exist.

Carbon credits will only be created, and available for trading, if the existence of commercial oil deposits within The Bahamas can be verified. There would likely also have to be a revenue sharing agreement worked out with the Government if Challenger's plan ever comes to fruition, and much work remains to yet be done.

Meanwhile, Casuarina McKinney, executive director of Bahamas Reef Environment Educational Foundation (BREEF), argued it was "ludicrous" for Challenger to describe itself as holding four exploration licences in The Bahamas when these had all expired two years ago and have yet to be renewed.

Voicing hope that the Government will charge the oil explorer interest on the outstanding licence fees owed over its Perseverance One well, she argued that the company had yet to fulfill its obligations because monies remain due and owing.

Challenger said it was sufficiently encouraged by the results of its Perseverance One well, drilled in waters 90 miles west of Andros, to believe oil may yet exist below the Bahamian seabed. However, it has made clear that it will not proceed with further drilling activities unless it can find a joint venture or farm-in partner to share the bulk of the financial, technical and operational risk as it seeks to recover its extensive investment in this nation.

The oil explorer's annual report also revealed it has still not fully paid licence fees due and owing to the Government from when it drilled Perseverance One. And it has yet to pay the $500,000 in "top-up" insurance for the well as the latter's costs exceeded initial estimates. It said: "As at the date of this report, the matter remains pending resolution with the insurers."