New oil regime coming

The Nassau Guardian

The government is looking to introduce a new Petroleum Act and regulations that would award greater royalties to the country if oil is discovered, Minister for the Environment and Housing Kenred Dorsett said yesterday.

The new legislation and regulations will hopefully also establish a sovereign trust fund for proceeds from any oil royalties; establish additional

revenue streams for the country and ensure Bahamian employment in the sector.

Dorsett said this framework should be in place before the possible oil drilling referendum in 2015.

Dorsett hopes that this change would allow the government to negotiate terms that are more aggressive in terms of the benefits for the Bahamian people in the future.

“When you look at all the licenses that have been issued, our regulatory framework speaks to minium royalties,” he said.

“And all of the transactions that have been negotiated by successive governments tend to be framed where we impose the minimum royalties, as opposed to impose a higher royality mechanism.

“We are looking at that framework as we go through the new regulations and act to be advanced. We are certainly looking at establishing a sovereign trust fund and looking at other means by which we can ensure the country earns revenue in addition to ensuring that regulatory regime imposes the need for the incorporation of Bahamians in the sector through certain positions having to be held by Bahamians.”

These changes though, would not affect the agreement the government has with the Bahamas Petroleum Company (BPC), according to Dorsett.

“Based on the legal advice that we’ve received from the AG (Office of the Attorney General), that will not mean that it would retroactively sort of affect the legal agreement that they have in place,” he said.

He also told The Guardian: “The royalties under our legislative framework was agreed at the time the license to explore was issued. That was done eight years ago.”

Dorsett said when the draft regulations are complete the government will place them in the public domain for discourse.

He said the government has engaged the Commonwealth Secretariat and its team to assist with finalizing the draft regulatory framework.

The government is hoping that the regime would last for the next 25 to 50 years if the oil sector is going to be a sector that advances in the country.

BPC CEO’s Comments

Dorsett also downplayed comments made by BPC CEO Simon Potter concerning its financial agreement with the government.

Dorsett said he contacted Potter to ask about the comments, which appeared in Guardian Business, and Potter told him that he was misquoted.

However, The Guardian has an audio recording of Potter’s exact comments.

Potter, who was speaking at a gathering of potential investors in London earlier this month, said based on the fiscal terms the company has obtained with The Bahamas government, the potential returns to investors from any oil strike would be “second to none, with a simple royalty” and likely to be “music to people’s ears”.

Potter also highlighted the fact that while the government could seek to change these terms in the future, The Bahamas' "ultimate court of appeal is the Privy Council in London".

“I spoke to Mr. Potter because I was concerned with the manner in which his statements were printed,” Dorsett told reporters.

“He indicated to me that he was misquoted.

“At the end of the day I didn’t hear or read his statement. I only have what has been printed in the media. I won’t speak to Potter’s statements but I’ve been made to understand that he was out there speaking to investors. If he has an opinion on the royalty provisions, which were negotiated eight years ago, that is certainly his opinion.

“Moving forward I certainly would hope that when a government negotiates terms that we are a little more aggressive in terms of the benefits that would accrue to the Bahamian people.

“The terms are entrenched in contract, unless for some reason that the agreement is terminated. But he's got a legally binding contract.”

Dorsett was also responding to Free National Movement (FNM) Deputy Leader Loretta Butler-Turner, who suggested that the government is trying to keep Bahamians in the dark regarding its financial dealings with BPC.

Butler-Turner said that some of Potter’s remarks were “deeply troubling”.

“First, what exactly are these ‘second to none’ financial terms being offered to the company by the Government of The Bahamas on behalf of the Bahamian people who have yet to vote in a referendum on oil exploration, as promised by the PLP during the 2012 general election?” Butler Turner asked in a statement.

"...Some of the remarks are deeply troubling and suggest that the Bahamian people are being kept in the dark by the Christie administration on oil exploration in general and the activities of BPC in particular.”

The government has said previously that it will allow exploratory drilling to determine if the country has commercially viable oil reserves before it holds a referendum on the issue.

Dorsett said in March, and reiterated yesterday, that the government will hold a referendum on oil drilling once it has determined whether there is oil in commercially viable quantities.

“It doesn't make sense to spend millions of dollars on a referendum if we don't even know whether oil exists,” he said.

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