For many years there has been talk of the possibility of an oil industry in the Dominican Republic and the economic and environmental impact that it could generate. In fact, there is data on the existence of oil in the country dating back to 1905, although the findings date back years.
The issue is back in the headlines after the Executive Branch submitted to the Senate a project that seeks to modify Law 48-33, which regulates oil deposits and its derivatives, to allow foreigners to explore and exploit hydrocarbons in the nation.
Oil has gained special attention in recent years, taking into account that, since 2019, the first round of bidding with onshore and offshore blocks open for investment was announced. From there came Apache Dominican Republic Corporation LDC, a subsidiary of Apache Corporation, which won an offshore block in the San Pedro de Macorís basin for the exploration and exploitation of oil and natural gas, in case they were discovered.
The company, according to press releases to date, would make an initial investment of US$5 million for exploration in the first four years, which would coincide with 2023. In a second phase, lasting three years, another US$8 million would be contemplated.
In a third period, they guarantee the drilling of an exploratory well, and if the oil discovery is successful, the investment in exploitation would reach around US$100 million. The company will make investments in the exploration phase at its own cost and risk and with a full commitment to operate in an environmentally and socially responsible manner.
The signing was carried out in 2020 and at that time the Minister of Energy and Mines (MEM), Antonio Almonte, highlighted that it was a shared production agreement that guarantees the Dominican State a minimum participation of 40% of the attributable benefits during the entire life of the project, that is, the total oil income.
Other news related to the subject involves the president of Guyana, Mohamed Irfaan Ali, who would come to the country in the coming months to sign concrete agreements for the exploitation of natural gas and the construction of a refinery that would imply capital investment by the Dominican State.
However, for the geological engineer Osiris de León, it is still too early to talk about the possible benefits that the Dominican Republic could obtain with the exploration and exploitation of oil.
“We do not know what the volumes of reserves that can be identified with the program would be until deep drilling has been done to reach the main deposit and it is possible to quantify proven reserves and we know what the volume of oil is in the subsoil,” said to the money.
Likewise, it is questioned what would be the sale price of that oil and what would be the economic recovery that the Dominican State could have from a partnership agreement with an international company that is interested in that oil deposit, as long as it appears in the subsoil.
“It is very premature to talk about what the economic benefit could be, because we still don’t know if there really is enough oil or not,” he adds.
As detailed by the expert and the reports, since 1872 the American geologist William Gabb reported the presence of oil in the country. However, it was not until 1905 that he began exploration focused on the seeps of the so-called “black gold” around Maleno and Higuerito (Azua basin).
The first well drilled in Higuerito produced around 400 barrels of oil, according to data from the MEM and Neoil Exploration. In fact, they affirm that until 1927 the additional drilling in Higuerito and Maleno reported good results for oil and natural gas, carried out by the multinational Texas Co. Later, in 1939, while the Dominican oil company drilled the Maleno 1 well, “which it produced significant amounts of oil, but it was a little mixed with salt water and that caused the well to be abandoned”, Seaboard Oil Co. acquired a concession in the Azua basin.
Between 1942 and 1947 another five wells at Maleno were drilled and abandoned (all with oil or gas samples). By 1958, Howard S. Cole Co. drilled another two wild wells in the Cibao basin and two dry ones by Compañía Petrolera Azua. Between 1960 and 1990 another 30 wells were drilled.
The reason that several of these deposits did not have the desired result is due, in the words of De León, to the fact that they were wells less than 1,000 feet deep. “The fact that they were less than 300 meters. indicates that the depths of these wells are comparable to the depths of wells for water exploration. In oil exploration, deposits are sought that are up to 1,000 meters deep, ”he said.
For the specialist, although the presence of oil in the Dominican subsoil has been known for almost 130 years, the State has not yet assumed the commitment to develop an exploration program in the southwestern region of the country. Even so, it highlights the exploration agreements signed with the Government of Argentina and Colombia, in addition to the conversations with the United States and Saudi Arabia.
In this sense, it highlights the possibilities of a true oil industry in the center of the Caribbean, taking into account that Venezuela, which is on the same tectonic plate as the Dominican Republic, has the largest oil deposits in the world so far identified.
Likewise, there are the oil reserves of Mexico and the United States, located in the Gulf of Mexico and belong to the Caribbean basin. Other success stories in the oil sector are Trinidad and Tobago, which “has a lot” of oil in the area, as well as Colombia, which also extracts it in its strip towards the Caribbean Sea. Cuba also appears on the oil map.
These facts, for De León, indicate that in the four cardinal points of the Caribbean Sea basin there are important oil deposits. “This means that the Dominican Republic must, as soon as possible, look for the most appropriate ways to develop a broad and deep exploration program that allows the Dominican State to identify where the main oil deposits are,” he said.
In the Caribbean
Oil has meant great profits for the neighboring countries of the Dominican Republic. According to the Economic Commission for Latin America and the Caribbean (ECLAC), despite the drop in the main destinations in 2019, the rebound in production in countries in the region offset the indicators.
In 2019, total revenues from hydrocarbons in the region reached US$79.8 billion, 10.4% more than in 2018. In relative terms, this result was relatively modest, equivalent to 2.7% of gross domestic product (GDP), compared to the 2.5% in 2018. They cite that Brazil and Trinidad and Tobago registered oil profits during that year equivalent to 1.0% and 1.6% of their GDP, respectively.
The Caribbean country’s hydrocarbon revenues increased dramatically that year, going from 3.9% of GDP in 2018 to 6.5% of GDP, driven by extraordinary tax and non-tax revenues. In the case of Guatemala, the foreign currency generated fell significantly, 33.4% in dollar terms and from 0.07% of GDP in 2018 to 0.05% the following year, despite the increase in production.
In Colombia, oil and gas revenues increased in 2019 mainly due to the payment of dividends by EcoPetrol, a state-owned company, to the national government. It was US$3.5 billion or 1.1% of GDP.
As a result, total hydrocarbon revenues reached 2.4% of GDP in 2019, up from 1.8% in 2018. State mercy, to the national government.
Challenges for the Dominican Republic
According to the consulted expert, the main economic technical challenges associated with the exploration and exploitation of hydrocarbons in the Dominican Republic are, on the one hand, the lack of faith of the Dominican State and of an important part of society, and on the other, the lack of financial resources. Even so, he understands that an oil float in the Dominican Republic is always going to be favorable.
“The entire Caribbean has been gradually demonstrating that it is a great oil reserve and this is certified by the large deposits in Venezuela, the largest in the world so far quantified. Then the reserves of Mexico, which are in the Gulf of Mexico, in Texas”.
In this sense, he added that the entire Caribbean basin has a large amount of oil and it is demonstrated in those extractions that are made in the United States, in Mexico, in Venezuela, in Colombia, in Trinidad and also in Cuba.
Oil companies in the Caribbean
Trinidad and Tobago is the Caribbean country with the largest refining capacity with about 170,000 barrels per day. The two refineries it owns are: “Pointe-A-Pierre” and “Point Fortin”. Cuba has “Nico López” and “Hermanos Díaz”, and a capacity close to 120,000 barrels per day.
Mexico, with six refineries, has a crude processing capacity that is estimated to be close to 30% of the total in Latin America and the Caribbean. Its largest refineries are “Antonio Dovalí Jaime” with 330,000 barrels per day and “Miguel Hidalgo” with 325,000 barrels per day.
Venezuela has the “Paraguaná” refining complex, it is the second in capacity in the world, with 980,000 barrels per day. Other notable ones are “El Palito”, “Puerto La Cruz”. The total refining capacity in the country’s national territory is estimated at approximately 1.3 million barrels per day.
Colombia has five refineries belonging to the state company Ecopetrol, the total refining capacity is 286,000 barrels of oil per day. The Barrancabermeja refinery has a refining capacity of around 211,000 barrels per day, making it the largest refinery in the country.