A small island importing nearly 90% of its energy needs ought to be acutely concerned that its auction of offshore oil exploratory licences attracted but one successful bidder (BHP Billiton). A clarion call to governmental action stations, perhaps?
Yet, unless press reports last month misquoted the Director of Barbados’ Natural Resources Division, no decision has been made about initiating a second round of bidding. There is thus no timetable to confirm (or not) a US Geological Survey that suggested Barbados may have 1.2 billion barrels of oil and 254 billion m3 of gas in its territorial waters.
The context of the auction’s failure and the actual lack of urgency in pushing on is this: current oil markets, despite current demand weakness, are beset by long-term under investment. When demand does recover tightened global supplies, in hand with the under investment, are likely to produce persistently higher energy prices than those prevailing today.
For Barbados, where public debt is over 70% of GDP and a painful BDS$730 million (10% of GDP) was spent importing energy last year, that outlook is particularly discouraging.
But there is reason for hope. Until two weeks ago São Tomé and Príncipe, another potential oil producer, faced some similar circumstances: an uncomfortable balance of payments position, one unsuccessful deep water test and little further interest since as the capacities of explorers diminished with the evaporation of global credit.
Then, as this WSJ piece reported last month, along came China's Sinopec with Addax Petroleum, its latest acquired toy. And presto! Drilling resumed!
Now, feelings about China's global hunt for resources are ambivalent. But fair exchange is no robbery and in a credit scarce world there are not many more other than Sinopec, CNPC and COOC who can readily finance deep water energy exploration.
For Barbados it is a quite remarkable constellation of events: a local economy in the grip of a global credit crisis; potentially transformational energy revenues off its shores requiring exploration partners; 32 years of friendly diplomatic relations with a cash-rich China actively scouring the planet for hydrocarbons. And China, in a particulalry funny turn of events, has a geologist as its Premier.
The conclusions the makers of economic policy in the island should draw would seem straightforward enough. Yet governmental fanfare heralding its new Beijing embassy suggests that top priorities are the buying of Chinese military uniforms and hardware, persuading Chinese money to recapitalise a regional airline and cultivating tourism ties with China.
Whatever the merits of those ideas, it would be an travesty were the list not broadened to include a concerted diplomatic-led effort to bring the Chinese integrated oil producers to the bidding table.
The potential payoff is immense, the outlay minimal.