Attorney General and Minister of Legal Affairs Senator Allyson Maynard-Gibson, QC yesterday told senators that the government's "research shows that Bahamians do not want a referendum on whether to explore for oil", doubling down on the administration's U-turn on whether government would seek approval via referendum before allowing a company to spud an exploratory oil well.

The attorney general was speaking in support of the Petroleum Bill, 2014 and the Sovereign Wealth Fund Bill, 2015, which she said would bring The Bahamas' petroleum industry in line with 21st century international best practices and lay the foundation for Bahamians to more fully benefit from oil exploration in the event that oil in commercially viable quantities is found in The Bahamas.

The question of a referendum preceding any oil drilling arises from Prime Minister Perry Christie's September 2012 statement: "We are continuing to talk to those people who are applicants, but as I have indicated before, oil drilling will only take place if the Bahamian people approve it through a referendum." Environment Minister Kenred Dorsett on multiple occasions in 2012 confirmed that this was the administration's position, before suddenly reversing that position in March 2013.

In the Senate yesterday, Maynard-Gibson sought to justify the position.

"The government has conducted research to determine whether Bahamians want oil exploration if oil exists in commercially viable quantities. Not surprisingly, most Bahamians said, 'First, let us know whether we do have oil in commercially viable quantities'. So, research shows that Bahamians do not want a referendum on whether to explore for oil. It also shows that Bahamians want information so that we can carefully consider and deliberate on matters of national importance," she said.

Downstream opportunities
Meanwhile, Maynard-Gibson pointed out that Bahamians are no strangers to the downstream economic activities in the energy sector. The Bahamas Oil Refining Company International Limited (BORCO), which has been operating in The Bahamas for decades, is the largest storage terminal facility in the Caribbean and the fourth-largest in the world, she noted.

"Other potential downstream activities include refining of petroleum crude oil and the processing and purifying of raw natural gas as well as the marketing and distribution of products derived from crude oil and natural gas. These products include gasoline, kerosene, jet fuel, diesel oil, heating oil, fuel oils, lubricants, waxes, asphalt, natural gas and liquefied petroleum gas (LPG). They also include hundreds of products derived from petrochemicals.

"An economy based on downstream activities alone will provide countless opportunities for Bahamians," she said.

The petroleum sector has three components: upstream, which includes searching for crude oil and natural gas fields, drilling exploratory wells, and subsequently drilling and operating the wells that recover and bring the crude oil and/or raw natural gas to the surface; midstream, which is transportation and storage, such as pipelines and gathering systems; and downstream.

"If there is oil in commercially viable quantities in The Bahamas, in deciding how Bahamians will best benefit from that oil, we will have to make decisions about which sector or sectors we shall develop and when. Also, it will require rapid expansion of the research and development skillset; universities and innovation," she said.

Future considerations
The attorney general added that small and vulnerable countries such as The Bahamas are always looking for sustainable ways to grow economically.

"Here in The Bahamas for over 40 years we have been relying on predominantly our services industries- tourism and financial services- and they have done well in terms of development of our human capital, physical infrastructure and our global reputation as a country focused on achieving excellence. These industries showcase our most valuable resource, our people.

"...Prudent utilization of oil, salt, aragonite, sand and other natural resources will cement, for future generations, a very bright future," she said.

The petroleum bill
Maynard-Gibson, whose Cabinet responsibilities include ministerial responsibility for legal affairs, argued that in advancing new laws the government focused on the following key frameworks: governance regulations and institutional framework; legal, licensing and contractual framework; fiscal and commercial framework; and health, safety and environmental framework.

In addition to the key frameworks set out above, Maynard-Gibson cited provisions which address miscellaneous matters pertinent to petroleum sector operations, including default and disputes, offenses and penalties. She said the government is presently setting the framework for exploration, which has the effect of setting a policy framework, which allows, at stage one, exploratory drilling conducted in search of an undiscovered reservoir of oil or gas.

At stage two, upon success in the initial exploratory drilling, the framework allows further drilling to determine the size, grade and configuration of a mineral deposit and the determination is made that the deposit can be commercially developed. And at stage three, the framework allows for well drilling and mineral and resource extraction from wells based on data gathered in the first two stages.

Financial provisions
Maynard-Gibson also highlighted the financial provisions in part three of the bill, particularly for royalties, fees and rents, compensation for environmental damage and ancillary matters, and also the duty to maintain records and annual reporting.

"What is important from this legislative formula is that the royalty will be calculated against the selling value of the petroleum prevailing in the market at that time or as determined by the minister with responsibility for petroleum. This is clearly advantageous to the Commonwealth of The Bahamas. The bill goes even further and provides an alternative to royalty at Section 32. Section 32 provides that it is in the national interest to take petroleum in kind in lieu of the whole or part of the royalty due."

Click here to read more at The Nassau Guardian