Cabinet cancels oil contracts, insists on new terms

There is good news and bad news tonight concerning the oil industry. The good news is that after being exposed by the opposition and pressured by civic groups and the media, the Belize Government has cancelled two production sharing agreements with local oil companies that gave them unusually favourable terms and disadvantaged the public treasury. The bad news is that although it cancelled the contracts, no government minister or functionary–from the Prime Minister on down—will explain how it is that the agreements came to be signed in the first place.

News of the government flip flop came in the form of a press release issued just after noon today. It stated that Cabinet had reviewed its various minutes and memoranda concerning the applications of BCH and ZMT International, two companies owned by businessmen Mike Duncker, Tony Zabaneh and Zaid Flores. The result is a new deal for their concession areas of blocks five and sixteen, which specifies a fifteen percent royalty payment to government off the top and production sharing percentages on the net ranging from a minimum of twenty percent government share for levels up to five thousand barrels per day, to forty percent for a huge field pumping over thirty thousand barrels per day. This compares to the deal signed on July twenty-fourth by Minister of Natural Resources Florencio Marin and his C.E.O. Allan Usher. Those terms called for a seven point five percent royalty and production sharing split for G.O.B. ranging from a paltry one point five to a high of only fifteen percent.

The question, of course, that has been asked since the U.D.P. press conference last Wednesday, is why the original contract—virtually identical to the one signed by Belize Natural Energy before they found oil—was ever agreed to in the first place. The official press release offers no help, saying only that the two contracts were signed a month before a new model agreement—created on the advice of Commonwealth experts—was ratified by Cabinet. It was common knowledge, however, reinforced by numerous government announcements, that once B.N.E. struck oil, any new petroleum concessions would have much stricter terms. The government release continued to seemingly justify the original lopsided contract by saying that Cabinet was only seeking to give local companies a helping hand. It then ended on a bizarre note by saying that government’s good intentions were deliberately misconstrued “to create political mischief.” Politics aside, several well placed sources indicate that the new deal is similar to the terms actually agreed to by the previous Minister of Natural Resources, John Briceno, and the two companies, and was in fact ratified by Cabinet in June. It is theorised that the subsequent lopsided contract was unilaterally altered and was signed without Cabinet approval. As for the local investors, who had this morning issued a now moot press release defending their contract, they are for the time being holding their fire. Mike Duncker told News Five this afternoon that he was “not pleased” with the cancellation of what he called a valid contract but that he and his partners needed more time to study the situation. News Five’s Janelle Chanona waited outside the Cabinet room from eleven this morning until three-forty-five this afternoon seeking a more detailed explanation from Prime Minister Said Musa or other key ministers, but was told that the Cabinet session was “long and intense” and that the Prime Minister would not be speaking today. We were however told that minister Florencio Marin would be available to the press later this week.