Since commercial quantities of oil were discovered in Belize in March of 2006, Belizeans have reacted with a mix of hope and apprehension; they hope that it benefits Belize, but they fear it may all be funnelled out to foreign or special local interests. And so far, hope has been losing. First, with Belize Natural Energy, the Prime Minister promised a 50% take of the revenues, and it turns out that the country is getting just over 20%. And today, the Opposition released what it says is more evidence that when it comes to petroleum revenues, it’s bad business as usual for the Government of Belize.
Last night, we broke the story about the very unfavorable terms of the production sharing agreements signed by two companies, BCH and ZMT International. Those local companies signed production sharing agreements with government in July. Well today, the UDP disclosed those production sharing agreements and offered proof that it was signed against the national interest.
Hon. Dean Barrow, Leader of the Opposition
“At the end of July, two PSAs were given out and those two PSAs that were given out, have to be a source of serious concern to the public of this country. Those PSAs were given to ZMT International Inc. and to BCH International Inc. The two PSAs are both dated the 24th of July 2007.”
The companies are registered one in the British Virgin Islands and the other in Panama. But they are local, the signatories are principals Antonio ‘Tony’ Zabaneh and Mike Duncker - two leading businessmen from Independence Village. Additionally Zabaneh is the husband of the Speaker of the National Assembly.
The agreements are for blocks 15 and 16. That same block 15 had been optioned
to a company called Lagoon Resources Limited. But it never was exercised and Lagoon feels it was cheated out of what had been promised. And it said as much in a letter to the Prime Minister.
Hon. Dean Barrow,
“Said Musa to whom Lagoon Resources complained knew on the 25th June or shortly thereafter, when he received a copy of Lagoon Resources Limited’s letter was told exactly what was happening but allowed, blessed, there are some people among our sources who say...let me leave that alone...certainly knew by the time the formal signature of the production sharing agreements took place, exactly what was happening.”
But what is most interesting is Lagoon's application to exercise its option in an application for a petroleum exploration license for block fifteen. In the production sharing schedule they commit to a minimum take for government of 15% on production of 5,000 barrels and a maximum take of 40% on anything above 30 thousand barrells. After being squeezed out of the deal, Lagoon alleges that its bid was leaked to ZMT principals so that they could make a better bid.
Hon. Dean Barrow,
“He thought in other words, ‘I offer to buy this thing for $100,000, tell Tony Zabaneh so they can offer $105,000.’ He didn’t know that no no, you give it to Tony Zabaneh for $5,000 and I was prepared to pay $100,000.”
And looking at the production sharing agreement, that’s just what happened. When that same block 15 was awarded to ZMT International, government agreed to far far less than what Lagoon had offered.
Hon. Dean Barrow,
“Mr. Tony Zabaneh received, got the PSA and will pay 1.5% on the first 25,000 barrels; 2.5% on the next 25,000 barrels; 5% on the next 25,000 barrels. That catches you over 50,000. Remember that at 30,000, Lagoon Resources was going to pay 40%. When you get to 50,000, Mr. Zabaneh will pay 7.5%,...let me go over it again. First 25,000 barrels 1.5%; the next 25,000 barrels 2.5%, its already at 50,000. The next 25,000 barrels 5%; next 50,000 barrels 7.5%.”
In fact its tops out at a government take of 15% for over 225,000 barrels when the Lagoon proposal had started at 15% for just 5,000 barrels. It’s a massive disparity between what was legitimately offered and what was later agreed to and that loss accrues to taxpayers.
Hon. Dean Barrow,
“Look, these things represent potentially a tremendous loss to the people of this country. Briceno, Marin, and Said Musa need to tell us what the hell is going on.”
But what it seems went on is that they modeled the contract off the Belize Natural Energy contract which was negotiated before oil was found.
Hon. Dean Barrow,
“Once oil was found of course, things changed. The government now holds the whip hand and so nobody would expect that the same PSA, the same terms and conditions with respect to the royalty that goes to the government and people of this country with respect to the fees on production that go to the government and people of this country. Nobody would expect that those same rock bottom royalties and production fees would find their way into PSA agreements post the discovery of oil.”
The determination who did what hinges around a Cabinet meeting of June fifth when the proposed terms for these same blocks were submitted. We are told that subsequently a decision was made to vary those terms and according to one source – what is in the final PSA is quote “far off” from what was proposed on June fifth. This was reportedly pointed out to the government by technicians in the Ministry of Natural Resources but to no avail.
CEO of that Ministry Alan Usher today defended the terms in the PSA. He says it fits in with the national strategy where different blocks are graded and agreements worked out based on seismic data. He says that these blocks for ZMT and BCH are in the pine ridge area and the low probability of finding oil there, dictated the terms of the agreement.
As for the proposed terms by Lagoon Resources, Usher says he knows of no application at all from Lagoon and as far as he knows their agreement had expired. After that he says government was free to enter into agreements with whomever they chose and so entered BCH and ZMT. It’s a developing story and we will have more in tomorrow night’s newscast.
