Wright affirms oil potential

Dr Raymond Wright, special projects manager of the Petroleum Corporation of Jamaica (PCJ), is backing a statement by Sagres Energy that the seismic structure identified in Jamaican water by its subsidiary Rainville Energy was significant and "could contain up to three billion barrels of crude oil".

Wright said that Sagres Energy, which received a licence to explore for oil on June 15, 2006, has been doing seismic work just north of the Pedro Banks and has identified a number of prospects.

"One of these prospects is considered to be rather large," he said.

The Sagres Energy statement released on August 27 disclosed that results of an independent evaluation of the "resource potential of certain prospectus identified in Sagres' blocks 9, 13 and 14 in the shallow waters of the Pedro Bank 120 kilometres offshore Jamaica show a gross mean prospective resource estimate of three billion barrels".

In the statement, president and chief geologist of Sagres Energy, David Johnson, stated that the evaluation provided a better understanding of the tremendous resource potential that exists in Jamaica.

"With the combination of nine of 11 historical Jamaican wells with oil shows, three mature sources, two potential reservoirs, and large structures, we believe that it is only a matter of time before a large, untapped commercial resource is discovered in Jamaica," he said.

"Furthermore, Jamaica is ready to commercialise its resource potential with refining capacity of 45,000 barrels of oil per day, electricity generators that accept gas, oil, or biodiesel fuels, an established bauxite industry, and a geographic position central to the major global marine trade routes."

Sagres Energy has indicated that it would continue to pursue joint venture partners to further explore and develop its interests in the blocks covered by its licences and has already "signed confidentiality agreements with several international energy companies to access the data for the blocks, and evaluate the potential for a joint venture".

Rationalising the company's need for joint-venture partnership, Wright, who has been one of the architects of the oil exploration policy for Jamaica, explained that Rainville Energy was a small oil exploration outfit and could not itself drill a well.

"Wells cost a lot, and depending on the depth of the water, it could cost up to US$40 million to drill a well," he noted.

He added that an equity partner would, therefore, be needed to either drill, operate or provide the capital to drill and operate, while sharing the economic rent that accrues from the venture.

"They are now seeking a partner and they are very active. I am sure they will be successful," Wright said.

The partnership that results would be based on a 'production-sharing arrangement'.

Wright explained that under this arrangement, there was a productionsplit among the foreign or local company that explores for oil, the investors in the production/extraction of the oil, the PCJ, and the Government of Jamaica.

Once oil is found, the exploring company recovers its exploration costs and the oil and/or gas is shared among the parties, based on a mutually agreed formula.

While the investors in the exploration and extraction are required to expend their resources up front, neither the PCJ nor the Government will spend any cash.

Under the agreement, Sagres Energy enjoys the right to conduct exploration during an initial five-year period, divided into two phases: the first requires the firm to processes existing seismic data and acquire new seismic information; the second, a commitment to drill at least one well or surrender the block and terminate the contract.

Jamaica imports more than 90 per cent of its energy needs with an oil import bill projected at US$2.5 billion in 2010.

- JIS