Significant Oil Find a Possibility

Special Projects Manager of the Petroleum Corporation of Jamaica (PCJ), Dr. Raymond Wright, has endorsed the statement attributed to Sagres Energy, the parent of Canadian firm, Rainville Energy, that the seismic structure indentified by the company in Jamaican waters was very significant and “could contain up to 3 billion barrels of crude oil.”
In an interview with JIS News, Dr. Wright explained that Sagres Energy, which received a licence to explore for oil on June 15, 2006, has been doing significant 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 confirmed.
The Sagres Energy statement released on Friday, 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 (20 metres) of the Pedro Bank 120 kms offshore Jamaica show a gross mean prospective resource estimate (oil) 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 exist 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,” he said.
Following the discovery of the significant oil potential, 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, Dr. Wright, who has been one of the architects of the oil exploration policy for Jamaica, explained that Rainville Energy (a subsidiary of Sagres Energy) was a small oil exploration out-fit 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 accrue from the venture. “They are now seeking a partner and they are very active. I am sure they will be successful,” Dr. Wright said.
The partnership that results would be based on what is called a ‘production sharing arrangement,’ to which the exploring and investing partners are subjected. Dr. Wright explains that under this arrangement, there is a production split among the foreign or local company that explores for oil, 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 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. Phase One requires that the firm processes existing seismic data and acquire new seismic information. The second phase requires Sagres to commit to drill at least one well or surrender the block and terminate the contract.
Should the newly discovered geological structure contain the quantities of crude oil indicated by the seismic tests, then Jamaica will receive a significant boost in its balance of payments, as the country imports over 90 per cent of its energy needs with an oil import bill projected to reach nearly US$2.5 billion in 2010.