A crude question

Will Belize's oil sweeten the lives of its inhabitants?

Belize, the tiny Central American country, struck oil in much the same way as the character Jed Clampett in the popular American TV series The Beverly Hillbillies. A few years ago, a Mennonite farmer dug a shallow well in the bucolic hamlet of Spanish Lookout and up bubbled crude.

The country joined the ranks of the world's oil exporters in January when its first shipload of crude hit the market. Production is a mere 3,000 barrels a day, but people in this nation of 280,000 are getting a glimpse of the opportunities - and opportunists - that accompany $60-a-barrel oil.

Government petroleum inspector Andre Cho said wildcatters have been tantalised by the speed in which Belize Natural Energy - a small private firm backed by American and Irish investors - last year found the first significant deposits of oil. In contrast to the heavy sulphur-laden stuff found in neighbouring Guatemala and Mexico, Belizean crude is so sweet and light that some local farmers are putting it raw into their tractors.

The strike couldn't have come at a better time for Belize's debt-strapped government, which hopes to use oil wealth to reduce taxes and bolster social spending.

Minister of Natural Resources John Briceno calculates that at current prices, the government's take from even modest oil production of around 60,000 barrels a day would cover the entire national budget of Belize. BNE officials say they don't know the true size of the find, but one partner told a local newspaper that 75 million barrels could be under a single 4,000-acre parcel here.

For half a century, oil drillers came to Belize hoping to hit the big one.

Denver billionaire Philip Anschutz spent millions of dollars chasing black gold in this tiny nation located southeast of Mexico's Yucatan Peninsula. So did Texaco, Chevron and others. Studies hinted at petroleum deposits lurking beneath the jungle floor. But drilling yielded 50 dry holes in as many years.

Thus BNE made history when it struck oil on its first attempt, 15 miles from the spot where the Mennonite farmer first found petroleum.

Financing

Key to the effort were two BNE partners: Northern Ireland-born Susan Morrice, the company's president and a veteran geologist with two decades of experience in Belize, and the late Mike Usher, an engineer and member of a prominent Belizean family who never gave up the dream that his nation could be an oil producer.

With financing from Morrice's husband, Colorado oil executive Alex Cranberg, and more than 80 Irish investors, the firm used seismic technology to map unexplored territory around Spanish Lookout. They found what they believed to be a sizeable oilfield under Mennonite pastureland.

The company's roughnecks hit oil three times in as many tries, naming the wells Mike Usher No 1, Mike Usher No 2 and Mike Usher No 3. Some Belizeans fear that coaxing the nation's long-hidden oil to the surface is equivalent to opening Pandora's box.

Belize boasts lush rain forests, delicate coral reefs, piercing blue skies and what it claims to be the world's only jaguar preserve.

Environmentalists are in disbelief that a country that made eco-tourism a pillar of its economy is courting oil companies.

Because the nation lacks a refinery, pipelines or basic petroleum infrastructure, the oil must be moved by tanker trucks along narrow roads to the docks in the southern city of Big Creek for export.

"We simply aren't prepared," said Godsman Ellis, president of the Belize Institute of Environmental Law and Policy who says that spills and other disasters are inevitable.

The nation's Geology and Petroleum Department is scrambling to add more trained personnel, and Cho's office in a low-slung cinderblock building with a corrugated roof has become a hubbub of activity. He has received at least half a dozen new inquiries as well.

Cho said the discovery has given the government greater bargaining power to demand a bigger share of oil revenue in new contracts. Some critics have grumbled that the government gave away the store in its deal with BNE, which pays a 7.5 per cent royalty off the top to the government plus as much as 5 per cent of revenue from production after transportation costs.

The government of neighbouring Guatemala, for example, receives royalties of 20 per cent and as much as 70 per cent of the production revenue.

Oil minister Briceno said the low royalty and production revenue-sharing figures were necessary to entice oil drillers back to the country. He said the nation would collect an additional 1 per cent royalty to spend on environment and social programmes and that the contract contained a provision allowing the government to purchase a 10 per cent stake in the firm.

But the Mennonite farmers on whose land the oil was discovered are wary. Concerns about outsiders meddling in their affairs led the conservative Christian group to flee Mexico 45 years ago for Belize, where they carved poultry and dairy farms out of 55,000 acres of jungle around Spanish Lookout. The community of 1,700 people is independent, funding its own schools, roads and other services. But the oil find could alter that delicate balance. The federal government, which owns all mineral rights in Belize, has the power to force landowners to accept oil drilling on their property for a small share of the oil revenue.

Early negotiations between the Mennonites, the government and the oil company were cordial, said Erwin Thiessen, chairman of the community. But he said the Mennonites were now pushing for a better deal to compensate for increased traffic, environmental and health hazards and disruption to their way of life.