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Oil – a dream or reality?

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Submitted by Andrew Nehaul

Carlisle Bay and Bimshire.

These are the names of the two offshore blocks obtained by BHP Petroleum for oil exploration. These blocks are located between 40 km to 140 km Southeast of Barbados collectively encompass an area of 5,000 km2 in area and sitting in water depths ranging from 1,200 meters to 2,000 meters.

These depths are deep but with today’s technology, not impossible for the extraction of oil and gas. With the recent finds off Guyana, a greater possibility exists for Barbados to soon become a member of this exclusive club.

There is no guarantee that oil will be found during BHP’s exploration but if it is, now is the best time to prepare for that possibility. If their work bears fruit, there will be an influx of other players rushing to our shores and so the Government must be knowledgeable and well prepared to negotiate with all interested parties.

Before we all jump up and down in glee and hope that Barbadians will all now be rich, increased revenue for the treasury does not mean gas at 5 cents a litre and money for all. On the contrary, any funds received should be spent wisely. Preferably on improving the islands infrastructure, health and welfare along with the creation of a wealth fund for future generations.

So, if oil is in our future, what happens next?

1) We need to be ready to create a Barbados Oil Ministry with qualified lawyers, engineers, visionaries and consultants who could advise the current and future methods of negotiating any and all gas and petroleum contracts. We must learn from what happened in Angola.

2) Investment possibilities for local Barbadians. 40 km offshore will mean from helicopter services to boats taking food and supplies on a 24 hour basis, to increased private air traffic at the airport, increased cargo handling at the port along with more tugs and pilots etc Let us not also forget that institutions like the Barbados Community College may need to be expanded as they will need to provide technical training in industrial welding both above ground as well as undersea, commercial electricians, and pipe fitting.

3) The creation of a wealth fund staffed with the best investment bankers with specific safe (conservative) long term investment strategies.

4) The creation of a new port on the east of the island to exclusively service the oil and gas industry. This should include a state of the art centre for an expanded coast guard and a new quick response long range marine fire fighting service.

5) Improvements to the Queen Elizabeth Hospital to include a helicopter pad for emergencies and an expanded surgical section to include but not limited to a specialized burn unit.

6) The training of Barbadians in the oil industry from non skilled workers to providing scholarships for persons interested in the oil and gas industry.

Careers in Oil and Gas There are countless jobs within the industry, each of them requiring different levels of skill and education. The most advanced jobs require degrees while the entry- and mid-level jobs require more basic training and education. Today there are over 1.700 Guyanese citizens working in their oil industry and we can expect that 20 – 30% of the working population in Barbados will find jobs in this industry when production commences.

The Government would be wise to have an exploratory committee formed and ready. To many the above scenario may sound like a dream but I can assure you that when the first discovery is announced by BHP or others, it will be one day too late to start planning.

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178 responses to “Oil – a dream or reality?”

  1. Crusoe Avatar
    Crusoe

    Hal AustinSeptember 5, 2020 4:22 AM

    Hal, foreign reserves are the measure of what a country has available, within current financial structure, to purchase goods and services from another. How can it not be valid?

    On the purchase of goods and services, of course. People will still buy Nike’s high tops, the top iphone, rims for their cars.
    Especially if there are savings in the bank. Especially if the can cut elsewhere i.e. more bad quality food, instead of supporting the local farmer for good food.

    Mauby pockets and champagne taste? Maybe. But that is not the point. The point is that devaluation is not the solution.

    Large duties on luxury imports could be. Incentives and grants for local producers could be. Leather shoes and sandals can be made by Barbadian craftsmen. If someone is spending Bbds$350 to buy a pair of work shoes for the office or for dinner dates, surely a local craftsman can make them for that?

    And no, they do not have to look like Clarke’s. They should look like genuine Barbadian made leather goods.

    THAT is part of the issue. Dressing in suits and ties that are imported from whereever. Remember the Shirt Jac? Think Tom was stupid when he wore those? No, Tom pushed local production.

    Much of the goods consumed in the hotels are imported. Meat, vegetables etc. Most of the food should be locally sourced, not imported. Wines, spirits, I get importing, but not food. None. Nada. Eat local. That is why they are on holiday.

    That needs to change.

    Construction, far more than steel. Electrical goods, plumbing fixtures, cement (raw materials), finishings, fixtures (lights and cabinets, baths) etc.

    It is not a simple equation. People call devaluation. What they are really saying is, turn on the screws to stop spending.

    This is far more complex than that and would need serious consideration.

    On the wages, you have a point. But there will be political pressure and we know how that works. Economics also considers the political environment.

  2. Crusoe Avatar
    Crusoe

    Wily CoyoteSeptember 5, 2020 5:56 AM

    I get you. However, overloading the body with medicine has its limits. Medicine has limits per 24 hour period, as you know. Blow those and you blow the body.

    You may be right, that my answer re political and cultural will is not achievable. I totally agree that it is mandatory.

    But to me that is the right approach. Mia and her group have to hammer it home. Live like our foreparents did, cautious and frugally.

    Produce more like we did in the 70’s, furniture, clothes etc. Stop importing crap. How many times have I said this on these forums. Duties can improve it here. There are loopholes (environmental levies or Port fees etc) if agreements get in the way of duties.

    When I go into the supermarket and see rubbish I cringe at the waste. But that is likely to stop, due to the pandemic.

    So, the forcing is there. I would however ask that government put serious controls on quality of corned beef etc coming in. To ensure that people eat properly, not garbage.

    The island also needs strict measures on praedial larceny. No long talk. We have known this for years. By getting rid of praedial larceny you will encourage more people to grow food.

    Make it clear that what is grown is the fruit of hard work and does not ”belong to we”.

    Much of the above is a cultural adjustment.

  3. TheOGazerts Avatar
    TheOGazerts

    Talking to myself
    There are some who will disparage the use of google when there is evidence against their line of argument.

    Then they move to a next topic and again opine as if they are an authority.

    The good news…. You can again google and provide a next opinion.

  4. Greene Avatar
    Greene

    you making a lot of sense, Crusoe. that means none of it will happen anytime soon

  5. TheOGazerts Avatar
    TheOGazerts

    A next google from the fool

    https://news.umich.edu/exchange-rate-devaluations-hit-poor-households/

  6. TheOGazerts Avatar
    TheOGazerts

    Google
    When it is not intuitive then google
    When some pontificate then google and find out for yourself
    No one knows everything.
    No one is right about everything.
    The fools who google probably get a broader idea of the topic than those who would make you think, they have no use of google. The joke is, they may be googling more than you do.
    On the field of ideas, two opposing ideas may contain an element of truth.
    In real life, few things are binary
    Google
    Google
    A modern shakespeare would say “Sweet are the use of google”

  7. Wily Coyote Avatar
    Wily Coyote

    @Crusoe

    “Hal, foreign reserves are the measure of what a country has available, within current financial structure, to purchase goods and services from another. How can it not be valid?”

    Not to answer for Hal, but you missing one major point, the Forgien Currency Reserves are mostly made up of BORROWED FUNDS and are not representative of the Countries viable finances. Would agree with your argument if the reserves had been country generated rather than borrowed. It’s a situation similar to ones personal credit, VISA balance owing is $150,000.00 and is in good standing, been paying the minimum monthly amount of $50.00. However your financial flexabilties are EXTREMELY LIMITED and ability to spend and re-borrow is non existant.
    Government and Central Bank Governor are hood winking the populace in continually quoting the reserves as a reflection of the Countries excellent finances. Reserves are growing unfortunately the DEBT is growing at an increasing faster rate, the distance between the Rock and Hard Place is getting significantly bigger.

  8. TheOGazerts Avatar
    TheOGazerts

    Have a great day Barbados

    We may agree or disagree, but rest assured that ‘I wish you well’.

    Have a great day, Barbados.

  9. David Avatar
    David

    @Wily

    A useful link which explained deny repayment, rescheduling, default and related matters. It is not a new subject.

    https://link.springer.com/content/pdf/10.1007/978-1-349-08311-4_6.pdf

  10. Hal Austin Avatar
    Hal Austin

    @ Crusoe

    It is not your fault, but this discussion has been going for years on BU. Let me simplify it. When you are doing your domestic shopping you do not just go out and say you are spending X amount of groceries.
    You first check your larder, then write a list and go out and shop; picking products from the shelves according to brands, etc. The importation of brands of corned beef is an irrelevance.
    In the process, you make decisions. Foreign reserves are the equivalent of saving up money to pay for a debt at a future date. It is the misuse of money.
    The same with imports. There are essentials and there are luxury and unnecessary items. We can reduce the need for foreign reserves by decoupling from the Greenback, fixing against a basket of commodities and currencies along with dealing in derivatives for essentials.
    You talk about goods consume in hotels are imported. I know that. The rum sold in Butch Stewart’s hotels are also imported. Hotels pay for their own imports, through their banks or foreign exchange dealers. In small economies the retail banks buy foreign currencies from the central bank, but this is not necessary. If I want foreign currencies I can go down the high street and buy them from banks or the post office.
    That has nothing to do with the economics of foreign reserves, but with political incompetence. This is going back to first years economics in the 1960s.
    The good thing about the options markets is that you do not have to pay up front and you can out that money to work, as Prof Persaud is now doing with the hotel sector.
    What Persaud is snow doing I have been saying on BU for years. Of the Bds$2bn in foreign reserves, we could have used $50m to establish a balance sheet post office bank, using the current 18 post offices to establish it.
    Such a bank will be of more relevance to the economic development of the island than subsidising badly managed family-owned hotels.
    This is what the Austrian economist, Joseph Schumpeter called ‘creative destruction’. Arguments about mauby pockets and Champagne are political, not economic.
    The problem is that whether DLP or BLP, the economic arguments are the same, there is no ideological difference – and it is outdated. I suggest you read Milton Friedman on derivatives.
    The reason we do not talk about the options market s is because of the lack of knowledge. But that is not a problem. We can buy in the expertise the same way we have with White Oaks.
    Why does the Trinidadian-owned Massy supermarket import carrots and other such vegetables along with rice from North America? Why do we imported sugared tamarinds from Thailand? Why do we import mauby bark from Haiti?
    We have certain obligations under bi-lateral and multi-lateral agreements, such as the World Trade Organisation, but there are ways to manage that.

    .

  11. TheOGazerts Avatar
    TheOGazerts

    It’s complicated. The argument contained can be put in a test tube, examined and seen to be applicable to more than Greece.

    When a complicated idea is presented in a single word… Google

    https://www.consensuseconomics.com/greek-devaluation-discussion619/

  12. John A Avatar
    John A

    @ Hal
    @ Wily

    The only way people will understand our reality is if the central bank started reporting reserves at net reserves.

    So one would then be given this

    Total reserves – outstanding fx loan balances = NET RESERVES

    We know this will never happen though as it makes for bad politics.

  13. Mariposa Avatar
    Mariposa

    David BU hoping that u would lift your journalistic standards above ground and not cower to pressure by keeping those standards of ethics and morals under ground
    Here is what i speak of
    A story in Barbados today speaks to the cost of buses and made mention of 20million US purchase by the Head of Transport Board
    Meanwhile after the buses were rolled out
    The Minister of Transportation stated in another section of the media namely the Advocate that the buses cost 45 million
    Now somewhere between these two is a mischievous lie
    Hoping that BU would do diligence and get to the truthfulness of the story
    Transparency is at stake

    Here is Barbados Advocate link

    https://www.barbadosadvocate.com/columns/editorial-take-care-our-new-buses

  14. David Avatar
    David

    The 45 million dollars includes the cost of the buses, the training, construction of the infrastructure etc. cost of the buses represent 20 million dollars.

  15. TheOGazerts Avatar
    TheOGazerts

    @Mariposa
    Very good point.

    Sometimes figures are quoted in US and at other times in BDS. With ‘creative accounting’, this would allow someone to buy in BDS and pay in US (other half falling in the cracks).

    Hoping no one rushes to convince me there is no such thing as creative accounting

  16. Hal Austin Avatar
    Hal Austin

    @ John A

    It is very difficult getting people to leave out the politics and discuss the economics. Economics is not a binary subject. If you put 15 economists in the same room you will get 50 different answers.
    The on thing they will all agree on is the process, the basic rules, the theories. When people Google and do not understand the underlying arguments, one finds it rather difficult explaining it to them. There must be a basic understanding, if not you are speaking two different languages.
    Has Barbados resumed paying its foreign creditors? Our total foreign debt is know only to the central bank and the ministry of economic affairs.
    That is the reason why I call for a whole of government annual consolidated financial report, including all the statutory bodies, pensions, BOSS and any other body or institution that depends on the government to meet its debt.
    We want to know what is the government’s total debt, leaving out nothing, including anything that has been under-written, guaranteed, promised, etc, and what reserves it has to meet those obligations.
    Other than this, we are dealing with smoke and mirrors. I am also disappointed that the opposition political parties, the university and think-tanks do not keep a scrupulous record of government revenue and debt, its P&L.

  17. TheOGazerts Avatar
    TheOGazerts

    Excellent intervention by the blogmaster who was able to break down the $45M into it’s many components.

    I read the story and was unable to extract that level of detail. Thanks.

  18. TheOGazerts Avatar
    TheOGazerts

    “If you put 15 economists in the same room you will get 50 different answers.
    The on thing they will all agree on is the process, the basic rules, the theories. When people Google and do not understand the underlying arguments, one finds it rather difficult explaining it to them. There must be a basic understanding, if not you are speaking two different languages.”

    Well said.
    Hopefully, you will reach the point where you realize that others can be as right as the economist who insists he is right and only his pov should be considered.

    Economist do speak in a variety of different languages and manage to communicate with each other, what really matters is the exchange of ideas and mutual respect.

  19. Mariposa Avatar
    Mariposa

    Not going to argue but 10 million US equivalent to 20millinon bds when compared to 45million is a great difference in over all cost

  20. John A Avatar
    John A

    @ Hal

    Government’s true gross debt as of today is unmeasureable.

    I say that because too many of their major entities like the NIS, transport board etc have not filed audited financial statements for years. As a result it would be impossible to arrive at a consolidated debt figure or asset figure for any of these entities. What we do know is we in Nuff debt though.

  21. TheOGazerts Avatar
    TheOGazerts

    Choose one
    He who fights and run away lives to fight and run away.

    He who right and run away is a coward.

    He who fights and run away, lives to run another day.

    See you guys later. Running away.

  22. Mariposa Avatar
    Mariposa

    A lying govt and a gullible people spells a recipe for disaster

  23. Hal Austin Avatar
    Hal Austin

    @ John A

    That is the point. This is mainly due to incompetence, but it is a convenient incompetence. It is also embarrassing to those of us who will like to refer to the way we manage our public affairs.
    We need proper government accounts.

  24. Wily Coyote Avatar
    Wily Coyote

    @David

    Read you DEFAULT LINK, the major thing I’ve concluded from the article Barbados could not partake of any of the advantageous options that the article put forward. Barbados in my humble opinion would have been better off DEVALUATING and living with the consequences rather than declaring DEFAULT. Default has left them saddled with more debt, increasing debt repayment, the option to borrow is extremely limited and ultimately they will likely have still devalue the currency in which case it will make it more difficult to pay back borrowed HARD CURRENCY.

  25. David Avatar
    David

    @Wily

    The article suggests a successful opposition party if elected can disassociate itself from the policies of the former government. Wishful thinking we know.

  26. John A Avatar
    John A

    @ Hal

    So then the MOF says ” we cant get audited financials for these entities going back years.” So wait who has the power to fire and replace boards not the same MOF?

    Its all just a circus of blame where the incompetance of one is shed onto the other. Truly a dam joke.

  27. Vincent Codrington Avatar
    Vincent Codrington

    @ David BU at 8 :29 AM
    Surely the issue is not whether a contrivance is new or not? Surely it is about whether it is rational,ethical or makes good economic sens?. We have had this debate before. Is debt repudiation a wise move for a country which previously had a reputation for good governance , economic management and financial credibility?

  28. David Avatar
    David

    @Vincent

    The SIMPLE answer is no BUT we agree the predicament Barbados found itself read junk status credit rating and unable to defend the sacred peg was DIFFICULT.

  29. Hal Austin Avatar
    Hal Austin

    @ John A

    It goes beyond simply fudging the figures, accountant s do that every day. Let us go back to the post-CoVid economic plan. If ever there was an opportunity for the digitisation of public sector records this is it.
    Not only will this drag us kicking and screaming in to the 21st century, it will improve productivity, thus the much talked about magical fiscal space.
    Instead, Dr Persaud (did he do a PhD? If so, where, when and what was his thesis?) has come up with the old trick of transferring wealth from the very poor to the wealthy and well-connected, while telling the masses to drink the medicine, it will do them good.
    In the meantime, like old ladies in the village Pentecostal church, we are speaking in tongues, dancing as if in the power, while reciting nonsense about foreign reserves and devaluation.

  30. Vincent Codrington Avatar
    Vincent Codrington

    Correction

    David BU at 8:25 AM not 8:29 AM

  31. Vincent Codrington Avatar
    Vincent Codrington

    @ David BU

    It would only appear difficult if one drank the Kool Aid.Because somethings are difficult does that mean doing the abominable. Difficult does not translate to impossible. At least not in my book. There are always better and wiser alternatives.

  32. Vincent Codrington Avatar
    Vincent Codrington

    @ David BU at 10:33 AM

    A political party may distance itself from the policies of a previous administration. It cannot distance itself from the commitments and obligations of the GoB. Your notion and understanding of the cited article does not represent who we are. Nor our system of governance. Your recommendation is not fit for purpose.

  33. David Avatar
    David

    @Vincent

    To a degree this is true. Our breed of politician these days have shown a reluctance for creative problem solving.

    >

  34. John A Avatar
    John A

    @ Hal

    I agree with you completely. What is lacking from all of these discussions and 3 card presentations is this.

    How will caribbean governments migrate their economies from a pre covid tourism based one to a post covid one where tourism represents no more than 50% of its total GDP?

    The problem is no one wants to have that discussion as its bad politics, so instead of working for their money the Brainiacs come up with ideas like pull down the reserves which wunna cant replace as tourism dead for now, to pay unemployment benefits.

    Total nonesence and a waste of time as it has nothing that will benefit the economy in it.

  35. David Avatar
    David

    @Vincent

    It was not meant as a recommendation, it was to inject another perspective for consumption.

    >

  36. Vincent Codrington Avatar
    Vincent Codrington

    @ David BU at 11:12 AM

    Politicians were never the main sources of creative thinking. The much maligned Public Servants and the think tanks in the backrooms of the political parties are the places where creative thinking takes place. We have been fortunate this far to have had visionary leaders. They need bright civil servants and bright members, a dream team. There are too many brimblers in town.

  37. Vincent Codrington Avatar
    Vincent Codrington

    @ David BU at 11 :12 AM

    I know. I trying to keep the debate going.

  38. David Avatar
    David

    The public service is not what it use to be, the political class has found a way to neuter.

    >

  39. John A Avatar
    John A

    @ vincent

    You aint doing bad for an old fellow 😁

  40. Vincent Codrington Avatar
    Vincent Codrington

    @ David Bu at 11 :30 AM

    You may be right. But if that is the case, they are not doing themselves or this country justice. Most technocrats have professional standards to maintain. They put at risk their investment of time and money into their education. Their accreditation can be suspended, not to speak of their reputation and self- respect.

  41. Vincent Codrington Avatar
    Vincent Codrington

    @ John A

    I am trying to leave a legacy for you young fellows. David confesses that the ancestors did not leave any will nor legacies. I suspect that it has to do with the level of oestrogen that is leaking into the water supply. You will have to check with GP on this. It is above my level of competence.

  42. Crusoe Avatar
    Crusoe

    @Wily, I agree, note that I said “within current financial structure” .

    It is technically and practically room. But yes, use of this, without corresponding revenues does widen the debt gap.

    @Hal, I agree that. Government expenditures should be used where that money would best create structural growth in the economy, of course. Debt financing, towards economic growth, can be beneficial.

    However, where it is merely throwing money into a sinkhole, is madness.

    Agreed.

  43. David Avatar
    David

    @Vincent

    The blogmaster is guided by Senator Franklyn on this issue. He often makes the point there is a good reason many are acting.

    >

  44. John A Avatar
    John A

    The biggest concern i see here is the absence in addressing the post covid economy by ALL parties involved. By that I mean the opposition, the press, the economic society, everyone like church mice on the issue.

    Fellows wunna cant wish away covid. Right now much of Europe is trending up again. Those are our source markets. If wunna feel you can out wait this virus you fooling wunna self. Look at the blows our tourism home market economies are taking and stop fooling wunna self that tourism will rebound quickly.

    In other words the ” ostrich approach” that wunna love to use will not work here, cause whenever wunna take you head out the sand covid going be there waiting pun you. So whats de plan?

  45. John A Avatar
    John A

    @ vincent

    Nice one lol

  46. Hal Austin Avatar
    Hal Austin

    @ John A

    Watch the old trick. Say nothing, do nothing, see nothing. The people are in the dark and they do not know. Look how they are attacking the OECD, the EU,, everybody but themselves.

  47. John A Avatar
    John A

    @ Hal

    So Hal they using the TRUMPIAN APPROACH then? Lol

    I hear on my Tv yesterday Trump say if they take out places like New York they did well with Covid

    So wait he sell New York to Canada this week then? Lord if we dont laugh we will dead!

  48. Mariposa Avatar
    Mariposa

    Two words attracted my attention in the discussion about the buses

    College of Negotiators
    In a time when the challenges are far and wide in barbados
    How is it that govt found money to funnel ” College of Negotiators” to find buses for Barbados
    Also what cost did govt pay them
    As if not the cost of buses are astronomical why oh why must govt continue to create positions for few

  49. Hal Austin Avatar
    Hal Austin

    @ John A

    It is circus horse riding. One minute they imposed an austerity programme, but they never said it was austerity; then they imposed a stimulus programme, but never admitted it.
    Then the president appears on CNN, the BBC World, ITV, and we are told how wonderful she is doing, promoting our tourism product as the chairman calls it.
    But the era of cheap flights is over, there is an urgent need for a new tourism business product (that word again), apart from sun, sea and Bajan bovine excrement.
    The Barbados experience must mean more than cricket, drinking bad rum and liming at Oistin’s. Travelling is more than a hotel room, ZR vans, a taxi drive round the country and eating in an over-expensive restaurant.
    I will take a lesson from @PLT and not offer any ideas, but there are numerous ideas for good leisure and tourism. We are all in this together.

  50. John A Avatar
    John A

    @ Hal

    PLT says he done sharing ideas as he has not got his royalty cheque yet on the last one! Lol

    But yes the post covid product must represent value and quality.

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