Belize Natural Energy discovered oil in Spanish Lookout 8 months ago. Since then, there's been a sense a sense of cautious optimism because finding oil in three wells does not mean that there are commercial quantities. Well today, officially, that caution was thrown to the wind when the announcement was made that Belize does have oil in commercial quantities. Tonight we have the full story, the declaration from Minister of Natural Resources John Briceno and the clarification of a few key points by Director of Belize Natural Energy Sheila McCaffrey.
Hon. Johnny Briceno, Minister of Natural Resources
"I take this opportunity to inform the Belizean people and this House that on March 6th of 2006, BNE wrote my Ministry and declared, and I quote, 'BNE indicates that the oil discovery in Spanish Lookout is of commercial quantity."
Sheila McCaffrey,
"Yes indeed we are confident that we do have a commercial discovery in Belize of the oil find we have made in Spanish Lookout. We have operationally drilling on the ground since the early days of June 2005, and we have drilled three wells and completed those and have those three wells in production at the moment. A fourth well is underway and will be completed within the next week. Roughly the three wells are producing about 2,000 barrels of high quality, between 39 and 41 degree APIs, light sweet crude oil for the last 90 days so that's really good news for everyone and its really good now to be able to make the announcement that this looks there is a commercial discovery.
This is an important discovery, there is no doubt about that, for the country. First of all we have the capacity of making the country self-sufficient on energy but I think we must keep it in context in terms of a global oil find, its still relatively a small amount of oil. We believe there are crude reserves at this moment in time of 44 million barrels of oil of which we hope to recover 35% of that which would be normal oil field practice and based on that, that is significant to the country. But do I think it's going to significantly change everything about the world oil prices, no its not. This is a drop in the ocean of the amount of oil that is required and this complete discovery will be used in a matter of minutes because the world is reliant on billions of barrels of oil every single day."
Hon. Johnny Briceno,
"Belizeans rightly ask how will this industry be developed, will it be owned and controlled by a few, will the benefits be enjoyed by only multi-national companies, what will happen to the revenue that comes to government, how much revenue will be earned. These and many other questions are all legitimate and require full and frank responses. This government believes that any response on the development of the petroleum, industry must has as its starting premise, the following principles and I quote: 'the entire property in and control of all petroleum and accompanying substances in whatever physical state located on the territory of Belize in which rights of exploration and exploitation are exercisable by Belize are vested exclusively in the government and people of Belize.' This provision of the Petroleum Act vests all oil in Belize exclusively in the government of Belize for and on behalf of the people. Oil is natural patrimony, oil in Belize belongs to the people of Belize. That Madam Speaker is a fundamental premise upon which we must develop the oil industry in Belize. The creed of the PUP also states that it is the sacred duty of the government to intervene actively in the economic life of the nation where necessary in order to secure a better life for all Belizeans.
The laws of Belize and the philosophy of the PUP makes it abundantly clear that our sacred duty is to ensure that as we develop the natural resources of this country that it is done in a manner that secures maximum benefit of the people of Belize."
Jules Vasquez,
First of all he quoted the creed of the PUP which has a populist sentiment in it, saying that the natural resources in Belize are for Belizeans and he gave an indication, reading from that creed, that is a populist interpretation of the ownership of this oil, that Belizeans own this oil, but if I'm not mistaken BNE is the one that administers the oil and will sell it as its own.
Sheila McCaffrey,
"BNE is the operator under a production sharing agreement for this license block and yes we are the operator of this oil field and will continue to be the operator. We do have an agreement and partnership with the government of Belize and as I've said from the very beginning, openly, honestly, and without any fears of being misquoted, this is in partnership with the government and people of this country. The government stands to make a substantial amount of money from this and 38% of all revenue generated from every barrel of oil will go directly to government."
Jules Vasquez,
Have you all contemplated the possibility that the government may be thinking somewhere the road of nationalizing the oil industry in Belize and nationalizing what are presently your assets?
Sheila McCaffrey,
"At this moment in time we have an international production sharing agreement which is a legally binding contract which states the exact terms and conditions of doing business here in Belize. We don't believe that would be changed. We believe this is a partnership with government, we have no reason to believe that will change.
Remember the history shows that fifty people before us failed to do this, 50 multinationals spent millions upon millions of dollars and it was free for anyone in this country or the government and go and develop the resources. The reality is that they didn't have the know-how, they didn't have the mindset that we had to go in there and do it."
Jules Vasquez,
Some have complained, the Opposition most vocally, about the sharing agreement, I believe its 93% to 7%. Do you think the government might want to revisit that?
Sheila McCaffrey,
"At this moment in time, as I've consistently said, there is three methods in which the government and people of the country benefit. Yes there is a 7.5% royalty, straight off the top; its production share of up to 5% on a straight cut of production; and there's a 10% buy in. And the three of those equate to 37% to 38% straight across the top of every barrel of oil we produce. That is in addition to things sales tax, income tax, and all the other taxation that is involved in employing people; social security."
Hon. Johnny Briceno,
"Madam Speaker I advised Cabinet that the current tax regime relating to petroleum requires immediate revision to ensure equity, a fair return on investment, and a maximum return to the Belizean people. The Petroleum Advisory Board has taken on as a priority a study of the appropriate tax law for the petroleum industry and it is expected that proposals for a new petroleum law will be presented to Cabinet before the end of this year. Madam Speaker I wish the record to be very clear on this point, there will be respect for the sanctity of all contracts entered into with companies for petroleum exploration and development. At the same time, there will be full compliance with all applicable laws."
Jules Vasquez,
The Minister alluded that there is a new tax regime which will be looked at specifically for the petroleum industry. Are you concerned that you all will be taxed onerously or disproportionately, this is a government that does have very serious financial needs.
Sheila McCaffrey,
"I do understand that the government has very serious financial need but I also know that they are being very conservative about the way they are looking forward with this and nobody wants to kill the goose that's laying the golden egg for them."
Briceno announced today that the Petroleum Advisory Board has urged government to exercise its option and buy 10% of the equity of Belize Natural Energy. He will now take that recommendation to Cabinet.
Since the start of this year, Belize Natural Energy has exported 100,000 barrels of oil to a refinery in Houston. The fourth barge with another 40,000 barrels is presently being loaded up. The company is also building a 40,000 barrel storage facility at the Big Creek Port. And while there is no plan for a refinery of any size, McCaffrey said that government and Belize Natural Energy are looking at the possibilities for a diesel production unit.
