April 23, 2012
CBA Report: Oil Exploration in The Bahamas Becomes Political Football and Hurts International Investors
Oil Exploration in The Bahamas, which should be an issue of Economic Development for the Country, and an important element in building a much needed Capital Market Driven Economy (CMDE) for the Nation seems to have degenerated into Political Football. The Council For Concerned Bahamians Abroad (CBA) has been closely following and detailing analytical reports on the progress of the Bahamas Oil Exploration Project on its Online Hub at www.ourbahamas.org.
The fledging DNA party in its attempt to gain traction against the FNM Government has continued to press the issue of transparency on the FNM’s dealings with The Bahamas Petroleum Company (BPC), and its position on the previously announced Oil Drilling moratorium. This pressure, in addition to an apparent need to use the issue against the PLP has led Prime Minister Ingraham to issue what many in the Country see as unwise and unnecessary public announcements that he will not allow oil drilling if he is re-elected. His position appears to be partially based on the fact that BPC is intricately tied to the PLP party, and because the original licenses were granted under the previous PLP administration.
Likewise, the Prime Minister’s public statements denouncing oil drilling are being viewed by the international investment community already committed and invested in the project as rash and irresponsible statements by a sitting Prime minister, which may have lasting effects on the confidence of foreign investors in future Bahamian based projects. In a country which is highly dependent on foreign direct investment and with a recently announced FNM manifesto which does not significantly address the role of foreign investment in the building of the economy, many viewers from the outside, Friends of the Bahamas, and Concerned Bahamians Abroad (CBAs), are now seriously concerned. Some in the CBA community feel that it has irreparably placed an unfavorable view of the stability of Bahamian based investments in the minds of the global investor community.
The BPC company is not alone in the damage inflicted. As a publicly traded company, potentially thousands of its investors have been individually affected, including some CBAs. In addition, major institutional investors such as TD Direct Investing, Fidelity Worldwide Investment, Barclays Wealth, Standard Life Investments and other major international investment entities have invested in this project. To pull the rug out from under these important investors and thousands of others could be a major problem for the Bahamas going forward.
These investors only recently monetized BPC within the past two years, during the FNM administration. It therefore makes it difficult for the administration to deny some knowledge of, and responsibility for, allowing this monetization process to go forward if it knew that it would not be allowing oil drilling.
BPC raised over seventy (70) million dollars from its investors to begin the oil exploration process. Sophisticated investors committing to this level of involvement will not easily forget what they may perceive as betrayal.
If the FNM administration did not like the deal the government got during the PLP administration, or had other concerns about transparency and PLP nepotism in the project, it had the means and option of renegotiating the deal rather than blindsiding investors with public statements essentially scuttling the project. It is obvious that the administration may know more than is evident to outsiders, but the impression made upon the international investor community is a critical factor.
Meanwhile, the PLP leadership has basically remained silent except to confirm that members of their party do have important relationships with the BPC Company. It appears that the DNA having pressed the issue, has given the FNM an opportunity to use it as a political football capable of damaging the PLP, its primary rival. The PLP on the other hand, apparently sees it as a hot potato, too hot to handle this close to an election they perceive they are poised to win, due to apparent defections from the FNM and the diluting effect of a significant DNA third party presence.
While the FNM seems to be a consistent performer in the management of what little fiscal resources the country has, it has failed to develop or propose even in its most recent manifesto any real solution to the issue of how to get money into the country.
Based on a CBA review, the fledgling DNA party has done a better job of proposing ideas of how they will bring money into the country, but other matters involving the credibility and capabilities of some of their candidates, and the issue of whether a country in dire economic straits should place its future in the hands of a new and unproven entity at such a critical time, is a major question.
On the other hand the PLP who claim to have an edge in the quality of their candidates, with some history of experience in running a government, and a leader with a profile of outreach to foreign investment, would seem to have the upper hand in addressing the money inflow problem. The PLP however has been slow in bringing its economic development plan to the table and seems to be losing the media battle in getting its substantive ideas and proposals heard as compared to the other two parties.
The bantering about of the Oil Exploration project by all parties is unfortunate in that this energy could and should be used to propose legitimate and much needed ways for the country and its citizens to benefit from any potential oil in the Bahamas. If oil is indeed within the Bahamas it would seem to behoove every political entity to do their best to see how to find and harvest the resource safely and profitably for the benefit of all Bahamians.
Viewing from the outside it appears to some CBAs that this issue being used as a political football is counter productive considering the state of the country's economy, where a major inflow of revenue is needed. The CBA has previously called for all political parties and candidates to publicly address the issue of how they intend to bring legitimate monies into the failing economy.
The world is watching how we deal with such an important global resource which is totally within our control. If the Bahamas blows this opportunity, how do we expect to be viewed from the outside?