Bahamas Could Become Oil-producing Province

by Larry Smith

Domestic production of oil and gas is the real elephant in the Bahamas. And if you think the opposition to LNG terminals here was vociferous, just wait until the campaign to stop oil drilling begins. At stake will be a potential transformation of the Bahamian economy and environment.

Five oil wells have been drilled in Bahamian waters since 1947, when the first was drilled off Andros. In 1959 there were oil shows from a well on the Cay Sal bank. And wells drilled off Long Island and at Great Isaacs north of Bimini in 1970 both had minor oil shows. The last well was drilled by Tenneco in 1986, but was abandoned due to a collapse in petroleum prices.

The latest entrant - the Isle of Man-based Bahamas Petroleum Company - is convinced (as most experts have been for years) that major oil and gas reserves lie under the Bahamian seabed, and technology has now advanced to the point where they can be exploited economically. This will have a huge impact on our marine environment, because a significant percentage of any oil produced offshore spills into the sea.

Unfortunately, there is little doubt that these reserves will be exploited someday. The only question seems to be how the government will decide to spend the enormous riches that will be gained.

"We can't turn down billions in revenue from oil, but we also need to figure out how to spend that money if it should come to pass. We need to look at national development," Uitilities Minister Phenton Neymour told me recently.

"As an environmental engineer I am convinced that oil exploration and drilling can be done safely once the necessary controls, equipment and expertise are in place. I don't object to oil production in principle, but the environment remains the government's number one priority."

Since the disastrous BP oil spill in the Gulf of Mexico last year, the government has maintained a moratorium on exploration and drilling. BPC's licenses (covering 3.87 million acres on the edge of the Great Bahama Bank) expire next April, but can be renewed for another three years. The company has already advised the government that it wants to drill a test well next year.

BPC has also joint ventured three licenses with the Norwegian national oil company, Statoil, which recently acquired the old Burmah Oil terminal at South Riding Point on Grand Bahama. But according to Environment Minister Earl Deveaux, there will be no drilling until a regulatory system is in place, royalties have been agreed, and a public consensus exists in favour of oil production.

The government is currently reviewing Norway's regulatory and environmental oversight system, and a Bahamian team is expected to meet with Norwegian officials later this year. This means all the hard decisions will be postponed until well after the next general election.