Sat | Sep 22, 2018

Ja goes in search of oil again

Published:Wednesday | November 12, 2014 | 12:00 AM
Phillip Paulwell (left), minister of science, technology, energy and mining, signs the journey board, while John McKenna, business unit manager, South America Tullow Oil Limited, looks on after the announcement of a new oil and gas exploration licence at the PCJ auditorium in New Kingston yesterday.-Rudolph Brown/Photographer

Christopher Serju, Gleaner Writer

Exploration for gas and oil offshore Jamaica is set to resume in a serious way, following the signing of a production-sharing agreement (PSA) with the Petroleum Corporation of Jamaica (PCJ) and Tullow Jamaica Limited, a wholly owned subsidiary of Tullow Oil plc. Under the agreement, which took effect on November 1, Tullow will begin exploratory work on 10 of the 31 blocks located south of the island with a total area of about 32,065 square kilometres.

This first phase of activities will involve information gathering by way of geological and geophysical surveys, environmental assessments, seismic data acquisition, and then processing and interpretation of all this data to inform an evaluation as to the presence of hydrocarbons such as gas or oil trapped beneath Jamaica's seabed. If these evaluations are favourable, then the company will have the option to proceed to the next phase of the agreement, which could involve drilling exploratory wells. If there are commercial finds, then the contract moves into the production phase.

five- to eight-year exploratory phase

However, Winston Watson, group general manager of the PCJ, used Tuesday's announcement ceremony of the new oil exploration licence to explain that even if the prospects for oil and/or gas are promising, these will not have any direct impact on the country's energy source options any time soon as the exploratory phase is expected to run anywhere between five and eight years.

"If there are hydrocarbons present in quantities that allow for commercial production, then we will move into the production phase of the agreement. We are looking at a lengthy and even arduous process," he admitted. Still, he described the agreement as a major milestone, even though "there are no firm guarantees at this point".

Watson explained that in keeping with its mandate, the PCJ team would oversee the entire process to ensure that all the deliverables are achieved. If oil is discovered in commercial quantities, then after the contractor has recovered exploration and development costs, the oil remaining will be shared with the PCJ on an increasing production scale, based on the amount of oil produced per day.

tullow's solid track record

He went on to point out that this agreement with Tullow Oil, which has interest in more than 140 exploration and production licences across 21 countries, and which projects to spend US$60 million in the first phase, was very different from most of the other such business deals it had explored.

"I have to point out that since we restarted our drive to seek interested companies of oil and gas exploration in 2005, this is the first time in recent years that we have an explorer with such a solid track record coming on board," the PCJ group general manager disclosed.

Energy Minister Phillip Paulwell declared that it would be imprudent to make public all the details of the agreement, since Jamaica is in negotiation with other oil majors. Describing the negotiations as very tough, he explained that under the terms of the production-sharing agreement, the Government had secured a maximum of 45 per cent of any production of more than 50,000 barrels a day.

That is in addition to other potential revenue streams. "Apart from the royalties the Government will collect, both parties will share in whatever is produced, up to a maximum of 48 per cent in favour of Jamaica," the minister added.