Government has settled its dispute with Belize Natural Energy Limited and has revoked the stop order it issued at the end of business on Thursday. The dispute was over the production phase for the Mike Usher Oil Field in Spanish Lookout and the financing for the 10% of the field that government hopes to buy. Today, the Ministry of Natural Resources held a press conference to discuss the settlement of that dispute and other oil matters. Here's the story.
Alfonso Noble Reporting,
The event was led by Minister of Natural Resources John Briceno, accompanied by Chairman of the
Petroleum Advisory Board Eamon Courtenay, Director of the Petroleum and Geology Unit Andre Cho and Dr. Ramanathan Ramanathan, a Trinidadian geologist and advisor to the advisory board. Ramanathan discussed the history of exploration in Belize. The first wells were dug in 1956 in Ylbac and Hill Bank and it would be another 49 years, and 51 wells before the big find.
Dr. Ramanathan Ramanathan,
"Irrespective of the lapse of time from 1950 to 2005, irrespective of the number of wells drilled, I think about 50 wells, and in 2005 when all the majors and intermediaries are gone, the small company with optimism and hope finds it. That is how it goes."
That's how it goes, but there is one curious historical footnote to all this, the oil field that's been discovered is close to the first well dug in 1956.
Dr. Ramanathan Ramanathan,
"Ironically the location is very close to the first well that was drilled in Belize in 1956 and they missed by only a few kilometers."
Now Ramanathan, who predicted in 1996 that oil in commercial quantities would be found in Belize says that there's more, a lot more.
Dr. Ramanathan Ramanathan,
"I was the guy who said, it was in 1996, about 11 years back, that oil would be found commercially in Belize. If you ask the question now what the prospects are, when I said good when it was not struck, I should say very good when it is struck. This is not a sensational statement but a statement with a professional opinion, a geologist's view."
And where will it be found?
Dr. Ramanathan Ramanathan,
"The number one that is the southern basin offshore is difficult, its difficult terrain but geologically like I told it is continuous with the field of Guatemala and also the southern basin on land starting from Crique Sarco, Punta Gorda, and Monkey River. I was in Crique Sarco in 1985/1986 and we collected asphalt samples that showed the seep from the deep seethed beds, that means oil has been generated there. Then the first northern Belize with the same plates as BNE. The plate that the BNE on is likely different from what we have been believing all these years. It is a new geological plate and that could be tested andn the success could be more and more."
And Ramanathan draws that conclusion because he says the oil fields in Belize are connected with Mexico/
Dr. Ramanathan Ramanathan,
"Now I am emphasizing more and more on Mexico because the Mexican southeastern sedimentary basin is the same basin, geologically, in which Guatemala and Belize are included. This was one of the main reasons why we strongly believed that oil would be here in Belize."
And while Ramanathan is optimistic about Belize, he a cautious man, and conservative in his prediction for the Mike Usher Wells. Estimates we've heard say they are good for 20 million barrels but Ramanathan stuck to the official line: proven annual production of 6.4 million barrels.
Dr. Ramanathan Ramanathan,
"When we say it proved, that measures the certainty with which the oil that the volume that you are saying is there, is supposed to be there. Now when you proved, it's supposed to be 90% to 95% surety. W hen you say probable it is 66% possible, that's probable, and when you possible there is a 33% possibility. Now the company is working on these results, possible and probable, and we are expecting them to provide that data in a couple months."
By then, government should also have a new tax regime in place, one that will give them 50% of the oil revenues.
Eamon Courtenay, Chairman - Petroleum Advisory Board
"It is fair and just for the share to be around 50-50. The tax situation in Belize today may not yield a 50-50 ratio. However the philosophical basis is that there should be equity and fairness between the investor and the country, that's the point. So it is not being unfair to any particular investor nor has government taken any decision in that regard yet but fairness must be had."
"Fairness must be had" and that was what pushed government to stop BNE's operation last week after a dispute about the production phase and government's buy in of 10% of the company's equity.
Hon. Johnny Briceno, Minister of Natural Resources
"I was just advised that it was in our interest just to put it on record which is what we did. We did send a letter to BNE on Thursday that we need to settle on these outstanding issues and that they need to stop production. I met with them along with Dr. Ramanathan and our director Mr. Cho, Andre, on Friday evening after the House meeting and we basically settled the two outstanding matters so we allowed them to continue to produce. And then yesterday and this morning we actually finished the agreements and I have in writing now that what has happened is that they have agreed to the conditions that we have asked. They have given us our first check on royalty, just for royalty, up to March 3rd for US$165,000 and then we add in the 1.5% production that we have, we have the tax that is being charged and all of that has to be worked out but they have done right now is pay the 7.5% royalty."
And with that cheque in hand, government continues to work with BNE but relations will continue to be testy as government gets ready to impose a heavy business tax.
As regards that 50%, that Courtenay says the government believes is equitable, Belize Natural Energy's position is that under the current agreement government stands to get 38%. Briceno says that they have not arrived at that figure in their calculations.
