Where are the profits from the oil industry?

The wealth from fuel production in the Cayo District has not had any real signs of trickling down to the residents of the area, and now the discovery of another commercial well has set off a firestorm of complaints. That’s because the revenues collected by government are not adding up while the investors are raking in huge profits. As it turns out, the well in Never Delay was declared commercial since last year but it only came to light in mid January when Susan Morrice, a shareholder with Belize Natural Energy, gave an interview to a Belfast newspaper.  Marion Ali visited the location in Never Delay on Monday and files this report.

Marion Ali, Reporting

The research by the Belize Natural Energy Limited to determine the commercial worth of the well started in 2008 and after eighteen months, those studies show promise.

Marion Ali

“This oil well at Never Delay is not yet in operation as an environmental impact assessment is yet to be completed.  However, it is estimated that roughly five million barrels of petroleum can be recovered from this site.”

Andre Cho, Director of Petroleum

“The oil is similar to the Spanish Lookout oil so we should be getting more or less the same price that we’re getting for the Spanish Lookout oil, which is the WTI crude less discounts and so forth; same quality. So whatever we’re getting from the Spanish Lookout crude, we’ll be getting for that.”

The yields from the Never Delay facility is not expected to even be half the amounts from the Spanish Lookout wells, but at a time when resources are scarce, five million barrels can translate to a substantial sum.  But even with the anticipated income, many people believe that amount could be substantially more for the government if the production sharing agreement signed with the company demanded more revenues. Director of Petroleum, Andre Cho agrees.

Andre Cho

“The work interest is ten percent, the royalty is seven and a half percent, the production share is one and a half percent and income tax is forty percent. That one and a half production share drops the government’s net take below what it is normally for a frontier country like Belize. That one point five percent is low compared to other countries. That was the contract that was negotiated a long time ago by the people who were in charge at that time. So it give us a fair net take. However, it could be better, it could have been higher in the mid fifties or so. What we have done in new contracts is improve on that. The royalty is not less than ten percent for onshore contracts.”

But aside from the production sharing agreement, Cho adds that an auditor has been called in to review BNE’s records to see if the high figures the company has presented on their expenditures are factual.

Andre Cho

“We have to focus in on those expenditures and look at them; check that all those expenditures are accurately reported and the market price, that they are competitive because remember BNE hires service companies that provide seismic services, drilling services other services. A number of these companies are affiliated companies so that’s where companies can take advantage and hike up the price so as to transfer price to their affiliates. So that’s where we have to zoom in and target auditing expenditures and we started since we recently acquired an accountant and we’re getting assistance.”

Marion Ali

“This is their fourth year of operation and the figures that they’ve presented to you all in the past, how have you found those figures to be? Accurate? factual?

Andre Cho

“Well, some of the figures, the costs seem high but we need to check them and see that they’re competitive and that they’re market price. And if they’re not and they’re bloated, then the income tax laws and our laws have guidelines that deal with that. We put a cap on them and so forth. So far we’ve had some concerns about them and that’s why we’ve started the audit.”

Marion Ali

“Can you say what aspects of them you’ve had concerns with?”

Andre Cho

“Well, in particular the drilling costs. The drilling company is an affiliated company and the costs seem high to us.”

If the audit shows that BNE’s figures are accurate, then they continue to operate as per usual, but they aren’t then the company will have to pay the difference.  But that audit will not be completed until mid year. Reporting for News Five, Marion Ali.

Cho says that that the BNE’s expenditure figures are over three hundred million dollars and that’s only up to the end of 2008. BNE also claims its earnings over the four years are one hundred and fifty two million, that’s without their expenditures for 2009. Government has received revenues totaling one hundred and twenty million dollars.