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Jun 28, 2006

Oil company claims new tax will kill industry

Story PictureWith the price of oil fluttering around seventy U.S. dollars a barrel even a miniscule ten million barrel field like the one in Spanish Lookout looks pretty rich. So it’s no wonder that when it comes to taxing all those potential greenbacks, the tax collectors and tax payers are going to have some strong feelings. Today it was the oil company’s turn to burn some fire on a government that it claims is about to kill the goose before it even lays its golden eggs. News Five’s Stewart Krohn reports.

Stewart Krohn, Reporting
It may have started as a love affair, complete with happy photo opportunities and optimistic speeches. But, like the old saying explains, ?when money goes out the window, love goes out the door.?

Today in a press conference at the Radisson, love was definitely on the run as the two lead directors of Belize Natural Energy, flashing occasional bits of Irish temper, accused the government of doing them wrong.

Susan Morrice, Director, B.N.E.
?The key point today and the reason why we are here today is because the government have proposed an increase in taxation.?

Sheila McCaffrey, Director, B.N.E.
?B.N.E. has been generous in given information over. We have sought to seek to be transparent. To tell the truth and to tell it as it is. That same level of corporation does not appear to be reciprocated. We are asking for a period of time for this new tax legislation that has been proposed to be consulted not only by B.N.E., but by the other licensed holders in Belize.?

B.N.E.?s specific problem involves Belmopan?s proposed raising of the corporate profits tax on oil companies from twenty-five percent to forty. This, according to government experts, when aggregated with existing royalties, profit sharing agreements and G.O.B.?s ten percent equity stake, brings the treasury?s take to around fifty percent of the company?s net income. But according to B.N.E.?s Susan Morrice, the old tax rate had already produced a fifty-fifty split; the proposal now before the house would give the government an unwarranted sixty-three percent share, a result that is both unfair and inimical to future investment.

Susan Morrice
?The proposed increase from twenty-five to forty percent is scaring the very capital needed to drill these wells and shoot this seismic, and find the reserves that are hidden under the ground here in Belize. This is a young industry. This is the beginning of an incredibly important part of the history of Belize. Do not cut of the legs of this infant; this infant industry. Do not chop off the legs before it?s even started to walk. To get the further oil out of the ground we need to borrow a hundred million Belize dollars. It sounds gigantic. It needs to be gigantic. This investment we are attracting into Belize. That move from twenty-five to forty percent will kill this business here in Belize.?

As the B.N.E. directors built their case for government duplicity, certain things became clear. For one thing, there is a disagreement over the numbers, particularly just how profitable the oil operation really is. The other is that despite their complaints, B.N.E. has few options other than to appeal to public opinion. And while even a cursory inspection of the newspapers, radio talk shows and buzz on the streets indicate that Belizeans want as big a share of oil revenues as possible, B.N.E.?s Sheila McCaffrey seems to be banking on G.O.B.?s current unpopularity to carry the day.

Sheila McCaffrey
?I think public opinion is heavily swayed against the government at the moment. We have a government that has had a difficult past, and a past that has been involved in questionable appropriation of funds. The vast majority of Belizeans that I?m involved in speaking to, and at the public forums that we?ve been involved in are saying to the government, what are you going to do with this money? How are you going to account for it? What are you going to be using it for? What about this petroleum fund? There has been no action by government to plug this into place. There is a lot of talk and a lot of words but no action. I think the vast majority of Belizean people are extremely sceptical that the government is going to be honourable about making sure that this money is dealt with totally appropriately, and dealt in manner that is truly transparent and will be able to move the economy of the country forward.?

As for any legal action, McCaffrey says that B.N.E. reserves the right to pursue that course and is considering the matter.

Stewart Krohn reporting for News Five.

B.N.E. is seeking to raise one hundred million Belize dollars in new capital, sixty million from bank loans and forty from investors. Current production, according to the company, is two thousand eight hundred barrels per day from five wells at Spanish Lookout. Three hundred, forty-four thousand barrels of high quality crude have already been exported with another twenty-four thousand sold locally. B.N.E. employs one hundred forty-five people and its offices are based in Belmopan.

Also at today’s press conference the company announced that it has halted all drilling on orders from the Department of Environment and hopes to resume operations in five or six weeks when a required environmental assessment has been completed. The B.N.E. directors claim that D.O.E. had reneged on an earlier agreement but sources at D.O.E. tell News Five that the agreed to environmental compliance plan covered the exploration phase only and that it was always made clear that an E.I.A. would be required once production operations began.

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