PCJ negotiating next phase of oil exploration
Avia Collinder, Business Reporter
Christopher Cargill, chairman of state-run Petroleum Corporation of Jamaica (PCJ), says negotiations are under way with two companies that are ready to move on to the next step of exploration for oil.
But he would not disclose the names of the companies, saying talks are at a "delicate stage".
The new phase requires more in-depth surveys and are expected to be costly, requiring investors with deep pockets. Cargill said 3-D exploration could cost up to "US$100 million".
The PCJ chairman, who is also a consultant to the Ministry of Science, Technology, Energy, and Mining (MSTEM), also cautiously suggested that the island may have more natural gas than oil reserves.
He said the estimated potential for natural gas was based on consultations with Jamaican geologists and data on the unique geological formation of the island, which caused plant material - the source of the gas - to be compressed below the ocean floor.
The potential fields are all south of the island, he said. "Jamaica may have both [oil and gas], but the potential for gas is greater," Cargill said this week.
Jamaica has been trying for decades to determine whether the fossils detected in its waters are in sufficient reserves for commercial extraction. In the past decade, Jamaica has licensed a number of offshore blocks to overseas companies to do surveys, with the most promising results having come from oil exploration company Sagres Energy of Canada, whose surveys detected 'prospective' reserves of about 2.7 billion to three billion barrels in blocks 9, 13 and 14, located off the Pedro Cays.
Jamaica consumes energy equivalent to 25-30 million barrels of oil annually, according to government data. Sagres estimated that if proven, the near three billion barrels could satisfy Jamaica's needs for 90 years.
set to earn
If oil or gas is found, Jamaica will likely earn from the licensing fees and production sharing agreements with the oil exploration companies.
Cargill said the financial benefits to the country might not be immediate on discovery, but that it could mean an improved credit rating for Jamaica and even more attentive lenders.
"What it will do is lower the risk profile for Jamaica's debt-repayment capability because we will now have the resources to repay. That is where we will get an immediate benefit," he said.
The PCJ has recorded interest and field visits from over 10 frontier explorers in the oil and gas upstream industry "including majors, super majors, and large independents", according to MSTEM's 2013-14 annual performance report.
Jamaica expects interested frontier exploration companies to convert that interest into production sharing agreements during the current financial year.
PCJ is negotiating with two companies, although a total of six had expressed interest.
Smaller companies previously engaged in exploration may give way to entities with deeper pockets to finance 3-D exploration and drilling, unless they are able to craft joint-venture arrangements to continue exploration.
The phase one explorations included Finders of Australia and Sagres.
"They were small companies and what they did was to look to bigger companies," Cargill said. Sagres, in 2011, had sought but apparently failed to secure a joint-venture partner to move on to deeper explorations and drilling.
The new prospects, with whom negotiations are ongoing, "are larger oil companies which have the deep pockets to do a 3-D seismic survey ... which shows exactly where to drill," the PCJ chairman said.
"The process the PCJ is in now is to sign up with some companies which have the wherewithal to do the next stage of seismic work. The agreement commits them within a certain time period after the completion of 3-D works to drill, or lose the rights to those areas," he said.
The investments involved in this stage "could fall in the region of US$40 million to US$100 million" for each company, said the energy official, depending on the number of blocks acquired under licensing for exploration.
"PCJ is in discussions with people who are serious, who will not sit on these areas forever," he said.
The energy agency aims to reach agreement on 3-D explorations by the end of 2014, and expects the surveys would take about 18 months to complete, followed by another 18 months of drilling.
However: "It may be seven to 10 years before Jamaica begins to enjoy the benefits," Cargill said.
As indicated on its website, the PCJ has 31 offshore and four onshore blocks available for licensing for oil and gas exploration. The offer is supported by seismic data and studies in the energy agency's database or available from its current licensees.