The Company’s business currently is focused and single-purpose: we have five licences for hydrocarbon exploration covering approximately 16,000 km2 (4 million acres) in the territorial waters of The Bahamas. The Company has four exploration licences in the southern territorial waters of The Bahamas, referred to as Bain, Cooper, Donaldson, Eneas (these four licences together referred to as the “Southern Licences”) and a fifth, the Miami licence, in the northern territorial waters of The Bahamas. The main licences of interest and focus are the Southern Licences.
Over the past sixty years, sporadic exploration has been conducted in The Bahamas. However, there has been very little drilling activity, with no drilling in the last 25 years, and, until Bahamas Petroleum Company’s involvement much of the seismic acquisition activity also occurred more than 25 years ago. Five deep petroleum exploration wells have been drilled onshore or in the Bahamian shallow waters between 1947 and 1986. Two wells were drilled in Bahamas Petroleum Company’s current licence areas.
In spite of the previous activity there was little or no oil and gas data readily available in The Bahamas when the Bahamas Petroleum Company project was initiated in 2005. By conducting a three year international search and the purchase of materials from oil companies, universities and research institutions, the Bahamas Petroleum Company team has acquired extensive material which includes well cores and rock samples going back to 1958 and a large amount of seismic data of various qualities.
All licences are held through wholly-owned subsidiaries of the Company, and were awarded on 26 April 2007 for an initial exploration period of three years, with up to three further exploration periods possible, subject to renewal elections, nominally every three years. Subsequently, the Company received a number of extensions of the initial three-year exploration term of each of the Southern Licences, such that the second exploration term for the Southern Licences commenced on the 8 June 2015.
On entering this second term for the Southern Licences, the Company was obliged to commence activity by April 2018 on an initial exploration well, with equipment capable of drilling to a depth of at least 18,000 feet (the “Drilling Plan”). This date was extended by agreement with the Government on various occasions, most recently in February of 2019, where the second term licence period was extended such that currently the Company’s work obligation is clear and unambiguous: to commence an initial exploration well on the Southern Licences by the end of 2020.
The Southern Licences are commercially co-joined, meaning that the drilling of an initial exploration well on one of the Southern Licences will satisfy the work obligation in respect of all of the Southern Licences. Everything we are doing as a Company, is in the single-minded pursuit of this goal: drilling an initial exploration well in the Southern Licences, in a safe and responsible manner, within the timeframe that is consistent with our obligations under the licences.
At the conclusion of the second term for the Southern Licences, the licences may be extended for two further exploration periods of up to three years each on approval of the Government (which, if BPC has met its licence obligations, may not be unreasonably withheld). At the time of extension, BPC will be required to relinquish 50% of the Southern Licence area, which obligation BPC considers may be satisfied almost entirely by relinquishment of areas in shallower waters over the Grand Bahamas Bank, which are of lesser technical interest to BPC.
On entry into a third exploration period, the minimum work obligation will be to commence the drilling of a new exploration well, essentially every two years, following the completion of the initial exploration well. At any time during this period the Company may apply for a production lease in respect of all or part of the area covered by the Southern Licences subject to submission and agreement of a development plan. As with the exploration period extensions, if BPC has met its licence obligations the grant of a production lease cannot be unreasonably withheld. Any such production lease would give the Company the right to produce petroleum from that production area for a term of 30 years (and with a renewal right on application thereafter).
In addition to the Southern Licences, in 2012 the Company made applications to the Government for a further five licences in the Cay Sal region of The Bahamas, on-trend from the existing Southern Licences, but in 2015 consolidated these applications from five to three. For these three revised applications, approval remains pending.
In respect of the Miami licence the Company remains in discussions with the Government concerning the nature and extent of any future obligations associated with entering into a second exploration term, should the Company so wish.