With large swathes of undersea and land sites closed to exploration and development in the wake of the Deepwater Horizon disaster, international majors and smaller firms are considering drilling elsewhere in the region. The Bahamas is firmly in their sights.
Washington imposed a six-month moratorium on drilling in US waters after the British Petroleum (BP) rig blew up in April, and the upstream oil industry in the Bahamas is by no means crowed. The few firms active in the country, foremost among them the Bahamas Petroleum Company (BPC), could be sitting on substantial reserves.
Incorporated both in the Bahamas and Australia, BPC holds a 100% interest in five separate offshore blocks in local waters, totaling some 15,500 sq km in area. Reports issued in 2008 said that there could be multiple 500m-barrel oil equivalent fields in the surrounding waters around the Bahamas, many of them located in zones licensed to BPC.
Some estimates as to the potential holdings in the company’s concession areas run as high as 17bn barrels, enough to make the Bahamas a considerable player in the international oil market.
While BPC posted a loss of 2m worth in the opening six months of 2010, company officials say this was more a reflection of increased activity, with expenses climbing from $145,000 for the same period in 2009 to $1.3m. Alan Burns, BPC’s chairman and chief executive officer, said that the higher costs were a result of the company gearing up for the next stage in developing some of its undersea holdings.
“The first half of 2010 was an active period for the company, as we continue to make advances in our portfolio and seek to identify targets which could be potentially ready for drilling by 2011,” Burns said when announcing the firm’s financial results at the end of September.
In anticipation of further outlays, BPC is in the process of raising $8m through the placement of new shares, with the company saying on October 5 that the proceeds would be used for a new seismic acquisition program off the Bahamas which would start either late this year or early next year.
Since the middle of 2009, BPC has not been alone in its efforts to develop the Bahamas’ energy potential, having established a joint venture with Norwegian major Statoil ASA to further explore and develop fields within the licenced zones.
The agreement made sound economic sense for Statoil, as it already had an existing licence to develop a field in Cuban territorial waters, adjacent to the BPC area. The Norwegian firm has also bought into the Bahamian energy sector, having acquired the South Riding Point crude storage and transhipment terminal on Grand Bahama Island in mid-2009.
While touting the potential of its holdings, BPC has been at pains to give reassurances that its projects do not pose the risk of an environmental disaster such as the Deepwater Horizon blowout. New safety precautions being put in place by drilling rig owners, and the geological formations are different to and more stable than those at the site of the Gulf of Mexico well. Also, any drilling in Bahaman waters would be at a much shallower depth, adding up to a vastly lower risk factor, the company said in a statement released in early October.
Low risk or not, there will be some in the Bahamas who will view the prospect of offshore oil exploitation with concern. With tourism being one of the driving forces of the country’s economy, any threat to the pristine beaches and delicate ecosystems of the island nation is likely to face strong opposition.
Even though the Bahamas was not directly affected by the Gulf of Mexico spill, the government is still considering seeking compensation from BP for the $500,000 or more spent on monitoring coastal waters and activating preliminary precautionary measures. The cost of a local spill, both financially and environmentally, would be great and the impact long-lasting.
While the benefits to the economy of having a viable oil industry are immense, care must be taken to ensure that building up one sector will not lead to other segments, such as tourism and aquaculture, suffering. Though investing in the sector is not without its risks, the upside is too compelling to ignore.