Government: More Profitable Revenue With Maranco

Posted By: Marty

Government: More Profitable Revenue With Maranco - 06/12/13 10:53 AM

Government Sets More Profitable Revenue Terms With Maranco

At the beginning of April of this year, the Government of Belize issued out a press release announcing that Maranco Energy Belize Limited had discovered an encouraging oil show at the South Canal Bank #1 exploration well in their concession area in the Orange Walk District on March 30. At that moment, the Ministry of Energy, Science and Technology and Public Utilities were not releasing the full details of the oil find. According to the Chief Executive Officer in the Ministry, Dr. Colin Young, at the moment, Maranco Energy Belize Limited should commence their second phase of drilling operations in order to determine whether or not the quantity of crude oil believed to be present beneath the earth is in commercial quantities.


“In terms of the Maranco oil find in the South Canal Bank #1 well, the company has completed its testing. Unfortunately they had some technical difficulties while doing that but they believe that what they have seen is good enough to report to the Department of Geology that they will proceed to drill an appraisal well as allowed under their production sharing agreement that allows them about 18 months to complete it and after that process they will be able to indicate whether or not the field is commercial or not. Appraisal well is where they dig a well where they initially found some oil, what they need to do now is drill another well that will allow them to collect additional information such as the amount of oil, the size of the potential field; they can dig up to three of those wells. After that process is when they will be able to ascertain as to how much oil is there and whether or not it is commercial or not. They have done the seismic testing which allows them to collect the data to indicate to them where to drill and they have dug the well and they have extracted some oil from that well but they have insufficient information at this point based on that well to decide and indicate whether the field is commercial and that is why they have to drill these additional wells to get a sense of the size of the field and the amount of oil they can potentially extract. They have 18 months because that is the amount of time they are allowed under the PSA, under their contract. Obviously, it is in the best interest of everyone, the company and the government for them to do this as quickly as possible.”

Young says that Maranco should restart drilling by next week. If the case may be that crude oil is found in commercial quantities, Young says that the agreed sharing agreement between Maranco and the Government of Belize is favorable for the country.


“Well it goes on how smooth and whether there are any other technical issues but they have to get back to the depth that they are at now and as soon as that happens they will do another test again, what is called a production test, to see how much oil they can extract and using the data they will be able to gather how much they think is there and then how much they can extract and that is what everybody is interested to know. If it is a commercial field then what happens next is that they have to do another Environmnetal Impact Assessment prior to them actually producing the field and once they start to produce then government will start to obviously get its share. Maranco has a very favorable revenue terms with the government; for example, on the first five thousand barrels they extract, they will pay government 15% and they get 85%, on the other five thousand dollars, they will pay government 20% and if they were to find over thirty thousand barrels, they would pay government up to 40%. This is very favorable to the government compared to the old PSAs like US Capital and BNE where the share was 98.5% to 1.5% with this one we are starting out at 85:15.”

CEO in the Ministry of Energy, Science and Technology and Public Utilities, Dr. Colin Young.


Posted By: Marty

Re: Government: More Profitable Revenue With Maranco - 06/14/13 12:05 PM

The Economics of a Maranco Commercial Oil Find shows no Revenue Inflows until 2015

The Belize Coalition to Save our Natural Heritage with the assistance of an independent oil expert developed an economic profile of a Maranco Commercial Oil Find at South Canal Bank 1. The results of the economic profile showed that Government is not expected to receive any revenue inflows until 2015. This projection period for any revenue generation from a Maranco Commercial Oil find is important as Government has tied the salary adjustment for teachers and public service workers in the next fiscal year which is April 2014 to a commercial find at Maranco’s South Canal Bank 1. There is no projected revenue in 2014 and projected revenue inflows to the Government in 2015 is BZ$24 million.

Of interest is that Government receives inflows earlier than with other production sharing agreements (PSAs) as the cost recovery arrangements for Maranco are vastly different than the existing PSAs. Cost recovery for Maranco is 65% allowing Government to begin receiving funds from the production sharing much earlier than other PSAs which allow 100% of the production revenue to be used for cost recovery before the Government receives anything other than Royalty.

Using the production and cost data from BNE’s Spanish Lookout oil field, the existing terms of the Maranco Energy Belize Ltd. PSA and the Income and Business Tax (Amendment) Act cited as “Corporate Tax”, an economic profile was developed. It is clear that at this point no one, not Maranco, not the Government and certainly not the Coalition knows what, if any commercial volumes will be discovered at South Canal Bank 1 or within the Maranco Concession area therefore the economic profile is based on the following critical assumptions:

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