JG - Jamaica's best prospects yet for oil
Jamaica's best prospects yet for oil
published: Sunday March 18, 2007
Members of Jamaica's delegation to the second licensing round announcement in Houston, Texas, recently. From left: Petroleum Corporation of Jamaica (PCJ) Group Managing Director, Dr. Ruth Potopsingh; Jan Ostby, Finder Exploration Ltd.; Phillip Paulwell, Minister of Industry, Technology, Energy and Commerce; Peter Nicholls, exploration manager, Gippsland Offshore Petroleum; Chris Matchette-Downes, Petroleum Goechemist, MDOIL Ltd. U.K., and, Prof. Simon Mitchell, geologist, University of the West Indies.- Contributed
A renewed drive by the government to find oil/gas resources in Jamaica has met with the best prospects to date, with seismic data showing some very positive indicators that commercially viable quantities of the ?black gold? may lie off Jamaica?s southern coasts as well as on land, according to reports by the state-owned Petroleum Corporation of Jamaica (PCJ).
The latest findings have led to optimism by PCJ and oil exploration players that if commercially viable reserves are found, oil could flow within a decade ? welcome news to import-dependent Jamaica which has been buffeted by economic shocks caused by the steep rise in fuel prices last year and compounded by increasing energy-consumption patterns.
Such an appraisal does not come lightly in the expensive, high-risk business of oil exploration, where typical shallow shelf (close to the surface) oil wells cost between US$10 to US$30 million to establish, and deeper wells up to US$100 million and over. The deposits, which are believed to lie off Jamaica's coasts, are located in relatively shallow waters adding to their attractiveness for exploitation. There are also significant prospects on land in areas such as at Santa Cruz, Portland Ridge and Windsor.
The PCJ reports that last month Jamaica sent a high-powered delegation to the heartland of U.S. oil country in Houston, Texas, to woo investors at the launch of a new promotional round for explorers for the remaining four onshore blocs and 12 offshore blocks. Much interest was generated by Jamaica?s presentation among medium-size, and a few large oil interests, including household names such as Shell, Petrobras and Murphy Oil. They were impressed with Jamaica?s prospects based on the geological and seismic data which indicate that there are definitely hydrocarbon (oil) deposits, with the $10 million dollar question being whether the rock formations that contain the oil is encased or ?trapped? on land or beneath Jamaica?s offshore area.
?The seismic data shows that the structures that support oil and or gas deposits exist but the issue is whether these formations are capped to prevent the oil from escaping at sea in which case it would not be a viable prospect,? notes Dr. Ruth Potopsingh, who heads the PCJ. However, in order to establish this it is necessary to drill a number of exploratory wells, she explained. While many larger prospectors have shown little inclination to invest in Jamaica?s oil prospecting drive to date, Potopsingh underlines that this is not unusual and represents the current industry norm where the bigger companies have ceded ground to the smaller ones for smaller blocs such as Australian company Finder, which is now seeking partners for drilling exploratory wells on their offshore prospects here.
Finder and Canadian firm Rainville represent the new breed of highly efficient oil explorers and have been granted licenses for eight offshore blocks covering an area of over 23,000 square kilometres and forming part of the country?s 24 blocks, which are geographically defined areas earmarked for prospecting. Some four onshore and eight offshore blocs totalling over 104,000 square kilometres are available for bids which are due by May 1, this year. Added impetus is being given to the oil prospecting drive by changes in the operating landscape which was presented at the Houston meeting.
New Production Sharing Agreement
Industry, Technology, Energy and Commerce minister, Phillip Paulwell who headed the delegation to Houston laid out the basic terms and conditions of a new production sharing regime which differs from its forerunner by combining production sharing and royalties on a flexible scale, unlike the fixed 12.5 per cent royalty in cash or product which the oil companies were formerly required to hand over to the government.
The new arrangement, according to the PCJ, is said to be more attractive to investors and allows five years for exploration and 20 years for production with qualified extensions. It also allows for full cost recovery from a cost pool.
After cost recovery all remaining petroleum is shared between government and the oil entity on a sliding scale of incremental production, while production sharing is derived from a profit pool, Paulwell notes.
The minister pointed out that the road shows overseas to promote Jamaica?s oil potential are ?more than cost effective? as they are paid for by the proceeds from the sale of data packs containing scientific information on Jamaica's oil and gas potential based on studies of the island's onshore and offshore geology collected by the PCJ since the 1970s.
The US$50,000 packets have so far generated over J$22 million in revenue for the country.