On June ninth government introduced legislation proposing a 40% income tax on the oil industry. By government's calculation, that rate of tax would allow it to get 50 of the earnings from the industry with the oil companies keeping the other half. But right now, the oil industry is really Belize Natural Energy, and lest you mistook their silence on the matter for consent, think again! The company accountants have been busy going over the legislation, and the company today held a press conference to make it clear: they don't like the tax one bit. Irish directors Susan Morris and Sheila McCaffrey claim that taking the tax up from 25 to 40% will spell ruin for the industry.
Susan Morrice, Director - BNE
"That move from 25% top 40% will kill this business here in Belize."
Sheila McCaffrey, Director - BNE
"We know this will definitely stop exploration. We want to stop the government from imposing this tax. We want a period of time to discuss this clearly, openly, and frankly. Why are we suddenly implementing a new taxation system that is going to effectively stop in its track and kill this industry."
According to Belize Natural Energy, the tax proposal, developed by a petroleum economist from Trinidad, is bad in every way, from conception to implementation.
Sheila McCaffrey,
"These consultant groups of people are brought in simply for a snapshot of days or maybe one or two weeks to make these informed really really important decisions."
And according to these directors, the recommendation that the Trinidadian petroleum economist put together is useless.
Sheila McCaffrey,
"The information that's out there is incorrect, it's inappropriate and incoherently put together and was put together in haste and rushed through parliament. It is not the way to do business."
Not the way to do business because BNE says it was never consulted.
Sheila McCaffrey,
"The new taxation legislation that has come into being was quite a surprise to us at BNE."
Susan Morrice,
"They want to increase the taxation from 25% to 40%. We only got to know that when you got to know that. We were not involved in any of the consultations up to that day."
Sheila McCaffrey,
"The government of Belize has consistently went on record offering partnership, cooperation, collaboration, and a commitment to consultation. When is this going to happen? To date it has not happened. A petroleum advisory board, a finance committee, that is governing the petroleum industry without anybody from the industry represented is ludicrous. It is a nonsensical way of moving forward."
But government is moving forward with the tax and Belize Natural Energy says it comes at a terrible time as it is about to take on more risky investments as the dimensions of the first oil field have been declared after two wells came up dry.
Susan Morrice,
"The Mike Usher #6 Well, dry. In other words, it actually usually means there's water in the reservoir instead of oil. When we open it and flow
it, water comes out instead of oil. So that means it is a failure. Same in the Roaring Creek #2, that was the well that we re-entered in the Belmopan area and you can see the cost, its $3.6 million spent over the last two months on wells that are a failure.
We now know the size of this field and it is small, it's 10 million barrels. That discovery is very small. It is a drop in the bucket. This is a very small field. This will not make a dent in the national debt. The potential exists here in Belize for many more barrels of oil. What we're looking at is the Mexican basin. It is a large large basin and I am sure you all know there are important fields in Mexico; large fields in Mexico. And that is what our geology is telling us, but it is very high risk."
And to overcome that risk, these Directors of BNE say they will need major money but the new tax is jeopardizing it.
Susan Morrice,
"To get the further oil out of the ground we need to borrow a $100 million dollars."
Sheila McCaffrey,
"The international reputation of Belize is tarnished in the international money markets. It is hard to attract large banking facilities to look at Belize for large scale investments. We worked with many banks for many months, some of who were not interested because of the credit rating of the country internationally."
Susan Morrice,
"The Belize risk, that's investment risk, topped with the increase, the proposed increase from 20% to 40% is scaring the very capital needed to drill these wells and shoot this seismic and find the reservoirs that are hidden under the ground here in Belize. And they do not want to hear about these goalposts being changed and so they are coming to Belize to find out. They say why is the deal being changed, what is going on. What sort of country is Belize?"
It's the sort of country where the government is intent on getting 50% of the gross which BNE says is untenable.
Sheila McCaffrey,
"50% of gross equals the cost to find and produce oil. So therefore
it's an impossibility to give 50% of gross revenue to the government. With the 40% tax, you will see that the government moves from 50% to 63% of take with a 40% tax."
Jules Vasquez,
From 50% to 63%.
Sheila McCaffrey,
"Yes and it is just not feasible and not viable for people to spilt a 35% and cover the cost."
Susan Morris,
"We must keep the income tax rate as an economically manageable (figure). In fact at the deal we signed, the 50-50 deal we signed, it had a rate of 25% tax."
But even though it appears unlikely that government will budge - these investors remain optimistic.
Susan Morrice,
"The train has not left the station. Now is the time to make this change."
Sheila McCaffrey,
"Pause, stop. Consider what you are doing. Look at the full facts. Make sure everybody is fully informed."
Susan Morris,
"This is a young industry, this is the beginning of an incredibll important part of the history of Belize. Do not cut off the legs of this infant, this infant industry. Do not chop off the legs before it has even started to walk."
A strong alarm, but government has been, at best, reluctant to factor in, much less favor the advice of Belize Natural Energy, which government believes is looking after its own interest and not the national interests. For that disregard and distrust, Sheila McCaffrey had a biting riposte.
Sheila McCaffrey,
"I defy anybody to find holes in what we've done. We have got the very best results for this country. We've produced 10 million barrels of oil that was never ever found in this country until we, BNE, found oil. Everybody else can talk, they can philosophize, they can politicize, they can do whatever they like. Quite frankly I don't care. The results of what we've done is what we've done and we will stand testimony to what we've done and I stand over everything this company has done and produced in the last year. I've been on the ground. I've been on the field everyday. I know what's going on and I am not whispering and rumor mongering in the government circles or any other circles any part in Belize. I am dealing with the facts."
And now government must not only "deal with the facts" it must deal with an investor that's prepared to roll out if it gets slapped with a tax it does not like.
Sheila McCaffrey,
"We would simply pack up and we would go another place in the world that has better conditions and more stable conditions. And believe me, we have those choices."
