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Belize Oil - Boon or Bane, The Independent Reformer, by Des Parrett

Following some excitement over a previous article on oil in Belize, (Friday January 19th edition) INdependent Reformer Weekly spoke with Spanish Lookout oil consultant Jim Cavanaugh.

We met at his home and noted he has four computers on desks around the room and charts, degrees, certificates and documents on the walls, and in neat piles on chairs and filing cabinets. He obviously lives with his work.

IW. How was it possible for a small company like Belize Natural Energy to discover oil in Belize?

JC. “Let’s get the perceptions correct. BNE did NOT discover oil in Belize. They discovered a new field at Spanish Lookout. We have known for many years that there was oil here in Belize.”

IW. But I understood that there were 50 dry holes before the BNE discovery.

JC. “That is not true. They were NOT all “dry” holes; some did indeed have oil, but could not be produced profitably. A number of wells were drilled near Belmopan years ago that found oil. With low oil prices, and no oil infrastructure, it was not economical to produce them, so they were shut in, but they are still there and so is the oil. These wells clearly established that we had oil in Belize.”

IW. Isn’t it unusual though for a small oil company like BNE to drill in a remote place like Belize?

JC. “More than unusual. It was due to the excellent geology studies of Susan Morrice plus tremendous courage on the part of the company investors to tackle such a high risk wildcat. Many of us petroleum geologists were taking “vacations” to Belize checking oil prospects right after the OPEC oil embargo in 1972-73 when oil shot up to $40 a barrel.

I came here with ARCO and there were also geologists from Marathon, Gulf, Phillips, Anschutz and others checking out the oil potential. We had our chance but our companies did not have the courage or conviction to drill. In their defense, though, the economics were pretty borderline as the price of oil dropped steadily to under $10. The key factor is that major oil companies lost interest while Susan Morrice didn’t.”

IW. How did BNE know where the oil was?

JC. “They didn’t. There is no technology that tells us WHERE the oil is, only where it might be. BNE used seismic studies to identify structures in the subsurface that could possibly store oil if it were present. They drilled on one of these structures and the result was a Cinderella story of success. It wasn’t due to a Fairy Godmother though, it was due to good geology coupled with intelligent use of complex petroleum technology.”

IW. BNE said they had the help of a spiritual advisor in locating the oil. Anything to that?

JC. ”Utter bull sh... ah, hogwash The oil business is a game of high technology Ouija boards are for dreamers and crystal balls belong on crystal monkeys.”

IW. So you are impressed with the BNE technology?

JC. ”The discovery was definitely brilliant!”

IW. But there seems to be a lot of problems now.

JC. ”Ben Franklin flew a kite into a rain cloud and found electricity, but certainly you can’t credit him for the electric light or the electric chair. The discovery of oil at Spanish Lookout was a completely separate action from the production of that oil. The discovery was a matter of competent technology, while the production has been a comedy of errors fuelled by arrogance, incompetence, ignorance and an integrity vacuum. Different people-different results.”

IW. The same company though, isn’t it?

JC. “Yes, and maybe even some of the same people, but a super scientist can be an awful accountant. BNE people arrived in Belize with one of those dim-witted “new Gringo in Belize” attitudes where they had all the answers, even claiming they could control the corruption in our government. They patronizingly talked down to all of us.

Such arrogance has destroyed a lot more new arrivals than have survived it. BNE was not only a disaster at public relations, but both the oil people and government employees were ignorant of oil production issues. The government had no experience and insisted on fumbling ahead instead of acquiring the necessary specialists to protect our national resource interests. You just don’t put a young inexperience employee in charge of a multi-million dollar (perhaps billion dollar) enterprise, but GOB did.

BNE’s ignorance splashed all over the place with their blatant misinformation about what we could expect during production. It was because of this information that Spanish Lookout contacted me. And the whole situation was complicated further with a lack of integrity in both camps.

GOB decided to arbitrarily increase the agreed upon tax some 60% as soon as commercial oil production was confirmed with no regard to the sanctity of original agreements. Atrocious and shameful act! BNE talked about the purity of their actions and goals while making compromising deals with politicians as they were trying to screw the Mennonites. It is an ugly scene of Greed Monsters gorging themselves until they find they are eating their own tails.”

IW. Maybe we can cover some of these problems later, but a big question in everybody’s mind is if the oil is going to be good for Belize. The size of the discovery seems to get smaller with each report. Just how much oil is there?

JC. “It is a major discovery and the revenues could have a significant impact on Belize. The total oil reports are inaccurate and undervalued for some unstated agenda. When we were evaluating Belize back in the 70s it was generally agreed that there was one definite oil province from the fault controlled Belize River northward. There should be several oil fields discovered in this quadrant north of the Belize River.

It was also a consensus that the Toledo area had good potential and Orange Walk was promising, although exploration and drilling there would be expensive because of the marsh lands. Offshore was not even considered because the environmental aspects of our barrier reef were just too sensitive. Also, Chetumal Bay looked promising for gas except that the Mexico/Belize boundary was in the middle of it and there was no way to deal with Mexico on petroleum.”

IW. But don’t you believe that the oil will eventually be a great benefit to Belize?

JC. “No, not necessarily. I knew a man who bought his son a workover rig and set him up in the oil well service business. Business was very good, but the son went broke anyway. He sent his son to college and then turned over a good environmental company to him. Two years later, the business had increased ten fold and things looked good, but the following year it went bankrupt with an overwhelming debt.

Our government has the same track record, perhaps even worse. If the oil revenues are allowed to go into our political general fund, they will be pissed away through the same incompetence, corruption and dishonesty that has resulted in our government increasing our national debt to more than two billion dollars with no tangible benefits going to our citizens.

The man I spoke of above did not finance his son again in a new venture, nor should we place even more of our precious national resource revenues in the hands of such gross incompetent spendoholics as our political leaders. It is well known that it is folly to hire an alcoholic to run your bar.

If our politicians get the revenues, in five years our national debt would probably increase ten fold and we will find that whatever revenues we expected from our future oil would already have been hocked as collateral for more loans.”

IW. That’s a pretty bleak assessment. Are you saying that our oil revenues could be good for Belizeans if handled in a better way? And if so, what would be a better way?

JC. “It is fascinating to me that no one asks where the Hell the two billion dollars went because we certainly have nothing to show for it. It is obvious that if that money had been invested better the benefits would have been better. And yes, there is a better way to handle our oil revenues.

“The Shetland Islands, although part of Scotland, were always treated as a bastard stepchild, and seemed to be last on the list whenever parliament doled out any funds. Then oil was discovered in the East Shetland Basin and the oil was handled throught the Sullom Voe terminal in Shetland. The Shetlands had the oil taxes directed to a special trust fund to be spent exclusively on education, health, art, sports, and financial development. Today they have the best schools and hospitals in Scotland.

Education is free and it is compulsory that every child attend school. Qualified students have scholarships for college. Theater groups and sports competitions are active on each of the islands. New businesses helped from the trust have dropped unemployment to less than 3%. They also have the rest roads in the British Isles.

“Belize can have the same results if the 7.5% oil royalty is placed in the same kind of trust beyond political control to be used exclusively for edu- cation, health, arts. sports and job development. The taxes, which are separate from the royalty, could con- tinue to disappear down the bottom- less pit of our general fund.”

More of this interview next week...

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The article was sourced from Dialogue Ireland.

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