A proven petroleum system main course garnished with an enthusiastic government and topped off with a reasonable government take should draw hungry oil and gas companies to the first offshore licensing round ever staged by Barbados.

The proven petroleum system is sourced from the same Orinoco complex that is active in Venezuela. Closer production comes from Woodbourne field onshore in southeastern Barbados, where 240 wells — with 80 to 100 working at any one time — produce 1,000 b/d of light, sweet oil and 1.6 MMcf/d of gas. The island nation uses 8,000 b/d of oil. That’s one reason for the government enthusiasm about the licensing round.

Barbados ranks this as a national initiative. “A strike will define the future of Barbados,” said H. Elizabeth Thompson, minister of energy and the environment, at an IHS Inc.-sponsored presentation promoting the round in Houston. Barbados, at 166 sq miles (431 sq km), wants to become the smallest independent oil nation in the world, she added.

The 24 offshore tracts up for bids surrounding the island have marginal oil and gas history. Conoco drilled one well, the Sandy Lane 1/1Z, 81 miles (130 km) south of the island. The well, aimed at a bright spot, had gas shows, apparently in a breached trap, according to André Brathwaite, chief geologist for the Ministry of Energy and the Environment. Prime prospects on the Barbados Trough and the Barbados Ridge have yet to be tested.

Wavefield Inseis completed a long-offset 2-D survey earlier this year using the M/V Academic Nemchinov with 37,732-ft (11,500-m) streamers. It conducted one 2,795-mile (4,500-km) survey followed by a 932-mile (1,500-km) infill survey to establish relationships among the Tobago Basin, Barbados Trough and Barbados Ridge and specifically to define the east flank of the Tobago Basin and the northwestern trend of the Barbados Ridge and to establish prospective hydrocarbon trends, added Halvor Snarvold with Wavefield Inseis.

The survey covers an area about the size of the Viking Graben in the northern North Sea off Norway. Among details, in one part of the survey, it established the Barbados Ridge actually was two ridges separated by a 28-mile (46-km) sub-basin. He also showed four-way and three-way traps.

Barbados put 27,101 sq miles (70,191 sq km) up for bids, or an average 1,042 sq miles (2,700 sq km) per block. The largest is 1,940 sq miles (5,025 sq km). Although the blocks already are tagged, the island nation’s government plans to ratify the laws that establish the regulatory framework in early August.

The government will publish the bidding rules on Sept. 3, accept bids until Nov. 30, declare winners on Dec. 19 and sign contracts in January next year.

Bryan Haynes, chief project analyst for Barbados, described the terms. The signature bonus is biddable with no minimum. It exists to help the regulators judge aspiring investors.
The annual training fee for local people also is biddable but with a US $100,000 minimum during the exploration license and double that during the production license period; all figures add an inflation-plus-3% per year accelerator. The coastal and environmental research fee also is biddable with a $50,000 and $100,000 minimums for exploration and production phases, respectively.

Application fees are $1,000 for reconnaissance, $2,500 for exploration and $5,000 for production, and annual rentals range from $5/sq km to $20/sq km.

The state can back in for up to 25% on the exploration license and will be carried until commercial production, when it will pay back from production. Royalties are 3% on gross oil and gas revenues, and the country has a 25% income tax. In addition, a 30% tax kicks in when oil prices exceed $60/bbl and gas prices exceed $6/Mcf.

Rounding out the event, Dennis Smith, economist managing consultant with IHS, offered hypothetic scenarios assuming a 3-year exploration period, no bonuses and minimum bids with $40/bbl oil and $3/Mcf gas with the 3% inflation. He assumed field sizes of 650 Bcf, 1.5 Tcf and 500 million bbl. Under those terms fields would pay back between $91 million and $4.6 billion for a 12% to 48% return with payout in 7 to 9 years. The government take would range from 33 to 37%.

With $48/bbl oil and $3.60/Mcf gas on the same fields, returns would range from 16 to 52%, and the government take would climb to 47 to 50%. At $70/bbl oil and $5.25/Mcf gas, returns would grow to 25 to 60%, and the government would claim 52 to 53% of revenues.

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