Government and BNE at odds over 10% equity in oil
Posted: 26/04/2007 - 10:20 PM
Author: Adele Ramos
This week Belize Natural Energy (BNE) issued a press release confirming that it had offered to buy back Government’s 10% oil equity, but according to BNE, the offer was prompted by the Government of Belize, contrary to Government’s reports that the offer was initiated by BNE.
But 10% of what would BNE have bought back from the Government? According to senior Government sources, the Government is holding that its 10% stake is only in the commercially producing Spanish Lookout oil fields, and Government is not liable for BNE’s explorations elsewhere that have proved futile. Government points to the Production Sharing Agreement (PSA) it had penned with BNE in 2003.
In its release this week BNE did not mention the Spanish Lookout field, but said that the 10% equity GOB has is in its PSA, which covers almost 600,000 acres. When we asked BNE for clarification on this point, we were met with a blank response, and told that BNE could not answer our questions at this time.
Government officials have explained to us that because Government has 10% equity in the Spanish Lookout field only, it is bound to pay for 10% of the costs and share in 10% of the revenues that are associated with that field. It makes a difference then, if BNE is arguing that Government’s equity also covers non-producing fields, because then GOB will earn no revenues from those fields where BNE came up dry. The end result is that Government’s overall returns would be less.
It turns out that Government still does not fully own that 10% equity. Last week a high ranking Government official told us that BNE was “holding” the 10% for Government, but when we questioned what he really meant, we did not get a clear explanation. Now things are much clearer.
That is because BNE is reporting that it has fully financed Government’s 10% stake in oil, and Government officials we spoke with this week concurred that indeed, while BNE is bound to only finance 50% of the cost of Government’s buy-in, BNE had agreed to finance the entire thing. We were made to understand, however, that the full terms of that arrangement between Government and BNE have still not been worked out months after Government’s decision to buy into the field., and one major point of contention is the question of just what GOB has 10% equity in – whether it is only Spanish Lookout or all fields explored by BNE.
Recent reports to our newspaper say that while the cost of that Government investment is somewhere near $3 million, BNE’s offer to GOB for getting back that 10% is $33 million.
When we questioned the difference in the figures, one senior government source told us that the $33 million figure was arrived at by BNE using projections of revenues Government would have gotten over a 10 to 15-year projection.
However, Government itself has said that it needs to audit those figures, because some GOB insiders are highly suspect about their accuracy.
BNE’s release said that Government had expressed its objective “…that Belizeans from all walks of life should have the opportunity to participate individually and directly in the burgeoning Belizean petroleum industry possibly through ownership of the said 10% interest.”
There is also now the question of whether the Government followed the proper procedure in sealing that financing agreement with BNE for the 10% interest in the oil field, as the transaction should have been published in the Government Gazette already, and the terms of that financing arrangement publicly disclosed.
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