ready for the drill bit: managing the risks

Ready for the Drill Bit: Managing the risks

As presented to various interested groups throughout the Bahamas.*

*BPC maintains a robust outreach and educational schedule, presenting to various business, civic, trade and religious communities in The Bahamas on a regular basis.

Disclaimer

This presentation (“Presentation”) has been prepared by Bahamas Petroleum Company plc (the

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person to whom this Presentation may be delivered or distributed without a violation of the laws of

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By attending the meeting where this Presentation is made, or by reading the Presentation slides, you

agree to be bound by these provisions.

2

Key Points

Bahamas Petroleum is working to:

– Maximize value growth to its shareholders

– Ensure wealth and opportunity creation for the Bahamian people and nation

Growth and development of the petroleum sector will require that wells be drilled to verify the presence

of hydrocarbons

If drilling is successful:

– The identified prospects have the potential for multi-billions of barrels of oil

– There will be time to train Bahamians for the jobs and opportunities

– The next two years could help rebase the Bahamian economy

Bahamas Petroleum and the Government are working on parallel paths:

– The Government is working to put regulations in place to oversee activities

– Bahamas Petroleum is aligning itself to ‘best practices’ jurisdictions of Norway, UK and the US as we prepare to drill

– All parties are committed to responsible exploration and preserving the environment for future generations

Geologically the Bahamas is considerably different to the US Gulf of Mexico. A “Macondo” type spill is

highly unlikely

Our “oil spill” modeling shows that “Mother Nature” is taking care of the Bahamas; but trans border

response planning will be important

Bahamas Petroleum Company Overview and Introduction to Geology

Exploration Potential of Bahamas Petroleum Southern Licences

Risk and Reward: Exploration/Production Life Cycle

Risk and The Environment

Summary

4

Corporate Overview

Isle of Man based Oil and Gas Exploration Company

Founded by Alan Burns in 2005

Initial Exploration licences granted in 2007

The ordinary shares of the Bahamas Petroleum Company Plc are traded on

the London Stock Exchange Alternative Investment Market (AIM: BPC)

Future Bahamian listing via BDR on BISX

Exploration office in Nassau staffed with Chief Operating Officer, Business

Manager, Lawyer and Environmental Scientist

Will add Bahamian members to the Board of Directors

Share Price Information

* Share price and Market Cap as at 27 January 2012

GBP USD Price* 0.0784 0.12

52 Week High 0.2506 0.39

52 Week Low 0.0539 0.08

Market Cap (mm) 96.5 151.6

5

Regional Setting

6

Petroleum System Elements – Regional, Surface and Subsurface Data

0

2

4

6

8

Oil & Gas Generation

Window

Gas

Generation

Window

Depth

(km

)

Source

Reservoir

Trap & Seal

Migration

Gas & Oil

No More

HC Generation

Source: AAPG/ExxonMobil/Schroeder 2004

7

The Ideal Seismic Response

Increase in Impedance Decrease in Impedance

Able to resolve boundaries of beds a few meters thick

1 meter

Source: AAPG/ExxonMobil/Schroeder 2004





Summary

9

➜ Cretaceous reef/platform imaging is significantly improved. Better imaging of the deeper section

➜ Pronounced dip to the south-west; thicker Jurassic (source); opens migration pathway to beneath

Cuban ramp; increased potential fetch area

➜ Records the evolution from hypersaline basin to platform basin morphology

Platform Margin Bahamian Foreland

Cuban Border Nassau Trend A Fold B Fold C

Top Cretaceous Structure

10

11

10 Kms

Fold B

Fold C

Trend A

Top Cretaceous Structure

Top Vertical closure

Area

Fold B 700m 750m 423 km2 (104,526 acres)

Fold C 950m 350m 63 km2

(15,814 acres)


Area

12

10 Kms

Fold B

Fold C

Trend A

Top Aptian Structure


Area

Fold B 2400m 1400m 288 km2

(71,166 acres)

Fold C 3250m 750m 63 km2 (15,814 acres)


Area





Summary

14

Typical Petroleum Lifecycle

Seismic: Provides detailed information on geologic (geophysical) conditions that may

indicate the presence of hydrocarbons

Exploratory Drilling: Verifies the presence or absence of a hydrocarbon reservoir, if present

additional testing may be done to establish possible flow rates

Appraisal Drilling: Determines volume of hydrocarbons, and characteristics of the reservoir

to ascertain whether a commercial development is viable

Development Planning and Construction: Determines most effective production and

transportation systems and build necessary facilities

Development and Production: Produces oil and gas from the reservoir through formation

pressure, artificial lift, and possibly advanced recovery techniques, until economically-

accessible reserves are depleted. Transports production to markets

Phase

~ 5 – 10+ years ~ 1 year ~ 1 – 3 years ~ 3 – 6 years ~ 20 – 40 years

Seismic & Geologic

Studies

Exploratory Drilling

Appraisal Drilling

Development

Planning &

Construction

Development and

Production

$50 million USD

$60 – 160 million USD

$400 – 600 million USD $30 – 40 billion USD

Bahamas Petroleum

Stage

Estimated Typical Costs

Co

st

Bahamas Royalty Income (Undiscounted)

Phased Development - 2 billion barrels of oil - conceptual

Year

$M

M

Annual Production Company Challenges:

Subsea development with FPSO

Environmental aspects

Limited reservoir specific information

Geologic complexity/oil quality

Government Challenges:

Converting resource use into sustainable

economic development

Benefits to The Bahamas:

Additional long term direct source

of revenue

Enhanced indirect revenue

Potential for direct and indirect

employment

Diversification in the economy

Social development 15

256

220

182

146

120

72

36 Millions

bbls

/yr

Annual

Cumulative

1 2 3 4 5 6 7 8 9 10

16

Rig – Songa Mercur – to drill well offshore Cuba 2012

17

Subsea Development for the Production of Oil





Summary

19

What is the Environmental Risk?

The incremental risk is negligible

– Geology is considerably different from the Gulf of Mexico

– 5 wells drilled previously in The Bahamas, 1947 – 1986; no accidents

– Mother Nature is working to protect The Bahamas from an accident in our license area

– 6 wells to be drilled this year in Cuba; one very close to The Bahamas

– Along major ship and particularly tanker routes from around the world and into the U.S.

Be prepared!

– Oil spill modeling

– Worst case discharge

– Environmental Impact Assessment

– Environmental Management Plan

– Sea bottom and shallow drilling hazards

– Oil Spill Response Plan

– Joined Clean Caribbean and The Americas

– Visited Cuba to evaluate capabilities and response organization

– Inter and intra-Government communications

– 12 months of well planning with high quality data

20

Historic and Proposed Drilling

Repsol dry hole

Announced November Spud

World Crude Oil Tanker Movements

21

Bahamas

Why a “Macondo” Type Spill is Unlikely in The Bahamas

22

The geology of the U.S. Outer Continental Shelf (OCS) is fundamentally different to the

geology of The Bahamas

US Gulf Bahamas

Rock Type Sandstone & Shales Carbonates

Rate of Sedimentation Rapid 20,000’ < 10 million years

Slow 20,000’ ~ 200 million years

Compaction High Low

Pore Pressure Abnormal – High Normal

New rule changes and legislation regarding wellbore integrity, well control equipment and workplace safety provide for redundant safety measures and ensure equipment is operating properly

Proper well planning is essential to drilling a safe well. We expect the planning for our well to take almost 1 year and our new 3D seismic provides the best data available for planning a safe well

23

Oil Spill Modeling

One of the industry requirements prior to drilling is the development of an oil

spill contingency plan – this plan is based on the simulation of an oil spill

Used to understand the transport of oil away from a spill so that we can be

prepared to respond immediately and effectively in the event of an accident

Very sophisticated model incorporating ocean currents, wind and oil properties

Key conclusion: “Mother Nature” is looking out for The Bahamas

Trans border planning and response will be important

% of oil released making shoreline, remainder either

evaporated or biodegraded

2,556 individual spills lasting 60 days tracked for 90 days;

no intervention

Environment: Oil Spill Movement Simulation

24

Location Surface

15 mbopd

Seabed 10 mbopd

Seabed 20 mbopd

Eastern US 0.05 0.03 0.02

Southeast

Florida 0.09 0.04 0.03

Florida Keys 0.04 0.02 0.01

Western

Bahamas 0.07 0.14 0.29

Eastern

Bahamas 0.16 0.12 0.11

Northern Cuba 46.44 34.98 27.26

Bahamian MPA’s 0.00 0.00 0.00

Total 46.9 35.3 27.7

• simulated release site

Sophisticated model incorporating ocean currents, wind and oil properties

An uncontained, GoM-type spill – very minor landfall impact on Bahamas

Trans border planning and response will be important

Ocean State Bathymetry





Summary

Timeline: Company Planning

26

4Q13 3Q13 2Q13 1Q13 4Q12 3Q12 1Q12 4Q11 3Q11 2Q12 3 Years

Corporate Objectives

• A well safely executed to 2,000’ into Jurassic source

• Shallower objectives as justified commercially

• Facilitate the drilling of a well

• Address funding, environment and permissions

• Delay not in the interests of shareholders but realisable

SEISMIC

2Q11

ENVIRONMENT

DRILLING

2D

3D

EMP

Well FEED

Long Lead

Farm-in

BDR COMMERCIAL

Long Lead

Acquired Fast track Interpretation

Potential well sites 3D PSDM Interpretation

Sites Defined

Farm-in

Consultation

Consultation?

Spill Study

Multi-beam

Renewal Obligation

Submitted

Clean Caribbean & Americas

Spill Plan

Cuba

Potential well sites

Enabling Regulations ?

EIA

Repsol

Zarubezhneft

Petronas PDVSA? ONGC? Cuban

Drilling

Repsol??

27

Key Points

Bahamas Petroleum is working to:

– Maximize value growth to its shareholders

– Ensure wealth and opportunity creation for the Bahamian people and nation

Growth and development of the petroleum sector will require that wells be drilled to verify the presence

of hydrocarbons

If drilling is successful:

– The identified prospects have the potential for multi-billions of barrels of oil

– There will be time to train Bahamians for the jobs and opportunities

– The next two years could help rebase the Bahamian economy

Bahamas Petroleum and the Government are working on parallel paths:

– The Government is working to put regulations in place to oversee activities

– Bahamas Petroleum is aligning itself to ‘best practices’ jurisdictions of Norway, UK and the US as we prepare to drill

– All parties are committed to responsible exploration and preserving the environment for future generations

Geologically the Bahamas is considerably different to the US Gulf of Mexico. A “Macondo” type spill is

highly unlikely

Our “oil spill” modeling shows that “Mother Nature” is taking care of the Bahamas; but trans border

response planning will be important

ready for the drill bit: managing the risks

Documents