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JAM | Feb 11, 2024

Lindsworth Deer | Leveraging oil reserves as a financial hedge and development catalyst

/ Our Today

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(Photo: STAS International)

Recent reports reveal that the Government of Jamaica has extended United Oil and Gas’ (UOG) exploration activities in the Walton Morant Basin offshore Jamaica for an additional two years (Weston, 2024).

This move coincides with heightened interest from major oil companies eyeing Jamaica’s hydrocarbon exploration prospects (Weston, 2024). The estimated value of potential oil resources in the region is significant, with UOG valuing the largest repository within its exploration zone at an impressive US$23 billion (Jackson, 2024).

Global attention has increasingly turned to deep-sea mining as a promising source of essential minerals for various industries, notably electric vehicle (EV) batteries (Deer, 2023). However, it’s crucial to acknowledge the environmental risks associated with oil drilling, akin to deep-sea mining but for oil (Hamilton, 2023). The recent oil spill in the Rio Cobre in Bog Walk, St. Catherine, underscores the challenges faced by regulatory agencies like the National Environment and Planning Agency (NEPA) in managing such incidents (Mendez, 2023).

An employee holds a sample of crude oil at the Yarakta oilfield, owned by Irkutsk Oil Co, in the Irkutsk region, Russia on March 11, 2019. (Photo: REUTERS/Vasily Fedosenko/File)

Furthermore, there are concerns that companies involved in deep-sea mining may exploit oil exploration as a pretext to map minerals for EV batteries and clandestinely extract them (Broadie, 2023). Nevertheless, alternatives to lithium for EV batteries have emerged, showcased by advancements in AI-driven crystal synthesis (Deer, 2024). Jamaica could exploit these alternatives by mining minerals from the land instead of resorting to deep-sea mining.

Given NEPA’s limited capacity to handle oil spills effectively, Jamaica is evidently ill-prepared to manage the potential risks of oil extraction (Robinson, 2023). The mishandling of the Rio Cobre oil spill further underscores the prudence in approaching oil extraction activities with caution (Loop News, 2023). Trade Winds Citrus Limited, accountable for the spill, faces enforcement notices and impending legal repercussions (Gleaner, 2023).

In light of these challenges, I advocate for the Ministry of Science, Energy, Telecommunications, and Transport to reassess Jamaica’s stance on oil exploration. Rather than permitting UOG to extract oil, I propose evaluating potential oil fields, assessing their value, and registering them as reserves to bolster the Jamaican dollar (Gleaner, 2023). By retaining oil in the ground, we can capitalize on its appreciating value due to scarcity in global oil markets (Broadie, 2023).

Lindsworth Deer. (Photo: Contributed)

Furthermore, Jamaica could strategically extract oil over time while continuing exploration for additional reserves (Robinson, 2023). Revenues from oil extraction could fund STEM education in Jamaica, ensuring sustainable long-term development (Broadie, 2023). This approach enables Jamaica to harness the potential benefits of its oil resources while mitigating environmental risks associated with extraction.

In conclusion, Jamaica must reevaluate its approach to oil exploration and extraction. By valuing oil reserves as financial hedge reserves and strategically extracting oil over time, Jamaica can safeguard its environment and economy while fostering sustainable development.

References:

  1. Broadie, M. (2023, December 15). NEPA serves enforcement notice on Trade Winds Limited, following recent oil spill. IrieFM. https://iriefm.net/nepa-serves-enforcement-notice-on-trade-winds-limited-following-recent-oil-spill/
  2. Deer, L.H. (2023, November 1). Letter of the day | Deep-sea mining a threat to Jamaica’s blue economy. Jamaica Gleaner. https://jamaica-gleaner.com/article/letters/20231031/letter-day-deep-sea-mining-threat-jamaicas-blue-economy
  3. Deer, L.H. (2024, January 4). Ja’s involvement in crystal synthesis goes beyond economic gains. Jamaica Gleaner. https://jamaica-gleaner.com/article/letters/20240104/jas-involvement-crystal-synthesis-goes-beyond-economic-gains
  4. Gleaner. (2023, December 15). Trade Winds Citrus served enforcement notice for Rio Cobre oil spill. Jamaica Gleaner. https://jamaica-gleaner.com/article/news/20231215/trade-winds-citrus-served-enforcement-notice-rio-cobre-oil-spill
  5. Hamilton, A. (2023, December 12). NEPA investigating oil spill in Rio Cobre. Radio Jamaica Online. https://radiojamaicanewsonline.com/local/nepa-investigating-oil-spill-in-rio-cobre
  6. Jackson, S. (2024, February 2). United Oil values repository south of Westmoreland at US$23b. Jamaica Gleaner. https://jamaica-gleaner.com/article/business/20240202/united-oil-values-repository-south-westmoreland-us23b
  7. Mendez, L. (2023, December 12). NEPA investigating oil spill in Rio Cobre. Radio Jamaica Online. https://radiojamaicanewsonline.com/local/nepa-investigating-oil-spill-in-rio-cobre
  8. Robinson, N. (2023, December 15). NEPA serves enforcement notice on Trade Winds Limited, following recent oil spill. Radio Jamaica Online.https://radiojamaicanewsonline.com/local/nepa-serves-enforcement-notice-on-trade-winds-limited-following-recent-oil-spill
  9. Weston, D. (2024, January 29). Government grants two-year extension to company exploring oil and gas prospects in Jamaica. IrieFM. https://iriefm.net/government-grants-two-year-extension-to-company-exploring-oil-and-gas-prospects-in-jamaica/
  10. Gleaner. (2023, December 19). Rio Cobre oil spill contained. Jamaica Gleaner.https://jamaica-gleaner.com/article/news/20231219/rio-cobre-oil-spill-contained
  11. Loop News. (2023, December 15). Oil spill in Bog Walk from malfunctioning boiler – NEPA. Loop News. https://jamaica.loopnews.com/content/oil-spill-bog-walk-malfunctioning-boiler-nepa

Lindsworth H. Deer, Dip.Eng, (UTech), BSc. Electronics and Chemistry (UWI), Dip.Ed (MICO) is a Physics and Integrated Science teacher at Tivoli Gardens High School.

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