Last night we took you to Spanish Lookout to give you an update on the oil operations. Three wells have been completed and a fourth is in the testing stage. Combined, the three called Mike Usher #1, #2, and #3 are producing about 3,000 barrels a day. At as much as $US60 per barrel that's a nice piece of change, but it's projected by some in government that this oil field has potential earnings of as much as US$1 billion.
Government wants half of that but it'll have to fight to get it. That's because Belize Natural Energy is urging government not to burden it too greatly with taxes. To get Belize Natural Energy's perspective on government's right to tax, we pick up where we left off last night with director Sheila McCaffrey explaining that her company took the risk and is entitled to the rewards.
Sheila McCaffrey, Director - BNE
"Yes there is money to be made in the oil industry, that's why we're here, that money is great enough and good enough to be shared with everybody."
Jules Vasquez,
But are the earnings great enough to support what government proposes, which is a 50/50 split of the earnings?
Sheila McCaffrey,
"I understand there's been a lot of political speculation about what is required and what isn't required. That again, as much of the discussion which happens on the oil industry in Belize, is speculation. We are in discussions with the government."
Jules Vasquez,
The advisor to the petroleum advisory board has said hey believe 50-50 is a fair split. Do you believe that is fair or do you believe that with that they're going to kill the goose that lays the golden egg, as you've said?
Sheila McCaffrey,
"I have no idea what the Petroleum Advisory Board has advised the government because that's closed negotiations between the petroleum advisory board…"
Jules Vasquez,
But it's on the record.
Sheila McCaffrey,
"…That's for political people and for the petroleum advisory board to make their comment on that. I think what we have to deal with is facts and the fact of the matter is we know that 38% of every barrel goes to the government in one form or another."
38% - it's a figure that publicly government balks at and privately rejects. That's because it's based on BNE's math which says that to get the true value of a 7.5% royalty on the gross production, it has to be calculated against the cost of investments and operations and thus by McCaffrey's math, that 7.5% that everyone's been complaining about must be multiplied by a factor of three to get the real value.
Sheila McCaffrey,
"So the factor that would be applied across the board from royalty to converting that profit is usually a factor of three so really our taxation level is 7.5% multiplied by 3 which is 22.5% plus 10% buy-in which we have loaned the government interest free and they don't have any interest payment to make plus production share which is why the we got the 38% in the first instance."
Jules Vasquez,
You are aware the Minister of Natural Resources has gone on record at a press conference to say that he does not accept that conclusion of 38%. He says he has not worked the numbers out, they have not worked the numbers, but certainly they do not accept that they're receiving 38%.
Sheila McCaffrey,
"Well I think working the numbers is realty important and ensuring that everybody is open and transparent with each other and there is time given for people to understand this is a new process for the department of finance for the government, for Belize Natural Energy, for everybody to understand."
And while government and BNE negotiate that understanding, production and exploration continue. And while there are proven reserves of 6 to 7 million barrels, the predicted figure says there could be at least 20 million barrels.
Sheila McCaffrey,
"We know that at this moment in time there are 6 to 7 million barrels of oil, proved, and we know there are possibly a lot more barrels of oil than that but we haven't been able to get in the proved category to be able to get it ready for production in another day's work.
But as our engineers are quite frequently telling me, until the last drop
of oil is squeezed out of there, we don't know exactly how much oil is down there and remember we've drilled four wells and its like four pins into a pin cushion and we have the information we have."
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And while she is confident, McCaffrey bristled at the talk that there are vast fields of oil all over Belize.
Sheila McCaffrey,
"We can speculate about oil being all over the country, as some professionals have said, but the point is that nobody has proved that except here in Spanish Lookout and people can make all sorts of speculations, talk all sorts of language that they feel would be useful for themselves to the make the point, but the reality of the situation, the real real story here is that this is the only oil that's been proved in Belize thus far."
And the folks at Belize Natural Energy are acutely aware of the opportunity they have as the first to find oil in Belize.
Robert Craig, Rig Manager
"A lot of the wells I've worked on around the world, oil supplies have been exhausted and now we are drilling for gas storage and alternate phases of oil exploration and development whereas here, it is a fresh resource, its
like opening Christmas presents at Christmas time. We found something but we're not quite sure how big it is and its exciting for me as well because this is what its all about.
We're pretty conscious of the fact that we've got a special place that we're working and we have to look out for that place and the people that are here, its part of the ethics. We want to stay here, we don't want to become enemies of the state. We want to be a good thing that's happened in Belize."
And as the natural gas burns off with a flare that tells all, oil is here, and the tanks seem two unassuming to contain such a precious resource, the only thing we do know right now is that the key to the future is stored in these dark depths. The only question now is who will control it.
