by Stephen Flanagan Jackson

The tiny rural school in Sandy Bay, Nicaragua has not had a decent roof since it was built back in the 1980s. More than 20 years of salt-laden winds off the Caribbean have eaten away the corrugated zinc sheets that cover classrooms, both prevailing breezes and hurricane windtrails: Joan (’88), Mitch (’98), and Felix (’07).
Now, prior to the first drop of oil delivered, before the first dividend is reaped, a US oil company is making sure that the school and its students have a ceiling over their heads.Such largesse is not the business of MKJ Xploration Co. of New Orleans, Louisiana. MKJ’s stock-in-trade is pulling profits from the earth – from oil and natural gas deposits. But MKJ represents a new breed of capitalist. MKJ is out to shatter stereotypes of the robber barons of yesteryear that came to Nicaragua to exploit the resources and the people. MKJ is out to show that profits and social conscience can co-exist.
Nicaragua, its President Daniel Ortega, and those governing the South and North Atlantic Autonomous Regions (RAAS and RAAN) are confident that MKJ can execute this precarious balancing act and last April, they granted a potentially lucrative oil and gas concession on Nicaragua’s Atlantic coast to MKJ.

And there will be risk…
“This deal with Nicaragua is a win-win situation,” beams an enthusiastic MKJ president Eric “Rick” Conrad after inking the contract in Managua. Conrad is chomping at the bit to plunge that first drill into the seabed. He realizes many hurdles remain: bureaucratic, scientific, and environmental.
“This is a business risk for us at MKJ,” says Conrad. “But we are taking this risk, because all reports indicate oil and gas reserves in the area. We also recognize the political risks. However, in five meetings with Ortega, and previously with Bolaños (former president), we have received much cooperation and support from the Government of Nicaragua.”
Conrad is the check signer for the upfront US$50 million MKJ is prepared to dump into this fossil fuel treasure hunt. For the money, Conrad will receive only one sure answer – whether or not there is enough crude oil or gas in commercial volumes to warrant sinking more millions into pumping it out from under the ocean floor.
“These are all risk dollars,” points out Conrad, referring to the initial investment. “Worldwide statistics indicate that only one in four petroleum exploration projects are successful. Plus, every country has political risks, including the USA. Certainly Nicaragua has shown a political crisis or two in recent years. But we are committed.”
Will Nicaragua morph into the next Venezuela – or Saudi Arabia – a member of OPEC? Only time will tell, but if oil explorations on both the Pacific coast by Norwood Resources of Canada and now MKJ on the Atlantic hit pay dirt, this Central American country’s longstanding and debilitating lopsided dependence on energy imports could be dramatically reversed.
The latest search for a Nicaragua Spindletop (paradigm shift ultra-gusher) comes with the April covenant between the government and MKJ. After years of frustration and patience, MKJ was finally awarded the lockdown concession. MKJ’s deal may lead to the development of potential reserves in excess of 10 billion barrels of oil, with economic production facilities in shallow seawater and near Gulf of Mexico markets.
Conrad, waxing optimistic for now, observes, “This agreement is the result of transcending politics. We have a lot of warm feelings for the people of Nicaragua. They are industrious, friendly, and progressive. Much different than what we have encountered in Costa Rica,” he notes.
“We are ready to begin immediately with the $50 million exploration phase which could take up to five years. If the exploration phase is successful in discovering commercial quantities, full-scale oil or gas production will generate substantial royalty and tax revenue for the Nicaraguan Government. We will already be providing jobs in Nicaragua, whether or not our drilling is successful. But with any sort of gusher, this will contribute greatly to the economic development of Nicaragua and provide a stable and secure source of energy,” Conrad speculates. “All this will benefit the people of Nicaragua, especially the RAAS and RAAN.”

And there will be opponents…
Some would take issue with Conrad’s outlook. Indigenous communities and environmentalists have more than a few concerns about the potential for damage to the fragile ecosystem and the trickledown economic benefits to the poor inhabitants of the Caribbean Coast. These reservations go beyond the well-meaning efforts of MKJ, with doubts about whether the Nicaraguan Government has the technical or economic resources to monitor foreign companies or prevent environmental damage.
The Oil Watch Mesoamerica Network cites apprehensions by the handful. Among them is the fear that indigenous peoples will see their longtime fishing spots closed off with the exploration companies “hiring military guards to control access.” Other concerns revolve around potential damage to marine life and contamination of the sea, land, rivers, and freshwater wells of the region.
The Caribbean Coast is geographically and culturally isolated from the rest of Nicaragua. An uncountable but relatively small population inhabits some 140 indigenous communities, with around 80 percent living in poverty, scratching out a living from small farms and fishing with a sub-standard infrastructure. Harvesting “white lobster” – sealed bricks of cocaine washed up on the coastline after an aborted transshipment from Colombia – has become an insidious, desperate, underground industry: a culture of acceptance.
One Miskito leader of Oil Watch, Humberto Thompson, is skeptical of the promises of jobs and economic improvement. Thompson warns, “The government says there will be more jobs and that this (energy exploration) will be a solution to poverty, but the history of others, like Ecuador and Guatemala, does not support that. The Indians who live in areas near oil fields continue to be poor.”
MKJ, however, feels a rising economic tide will float everyone’s boat.

And there will be support…
As per the terms of the six-year exploration contract with Nicaragua, MKJ will search for resources about 60 miles from the shore in Caribbean waters. The US firm – known as MKJ Exploraciones Internacionales in Nicaragua – then would have a 30-year contract to produce oil and natural gas, if it finds anything. A Nicaraguan court threw out a similar agreement signed with Ortega’s presidential predecessor, Enrique Bolaños, citing provincial leaders’ claims that national officials had not sufficiently determined the impact exploration would have on fishing and tourism.
“We went back to the local officials in the RAAS and RAAN areas and won their support. So we got the votes to ratify this contract,” MKJ’s Conrad told Between the Waves. “They understand that our project will benefit the local people as well as the Nicaraguan economy in general.”
Conrad insists, “We are not a threat to the environment or to the locals. We can co-exist.”
He continues to paint a glowing picture of the future, “if this project is successful.” The Stateside wildcatter predicts a bonanza “that would transform all of Nicaragua and its economy. This could change Nicaragua’s cash flow and balance of trade problems. If we hit oil in commercial quantities, Nicaragua could have a trade surplus and not be dependent on other countries like Venezuela and the US.”
MKJ’s partner in the Caribbean venture is Noble Energy, a prominent and well-heeled international petroleum well developer. An executive for Noble, Pat McCuiston, adds, “We know we are guests of Nicaragua. We are not politicians. We know we have to work with the people of Nicaragua.”
Eschewing the cavalier attitude of a 19th century Rockefeller or Vanderbilt, Conrad says, “We are sensitive to and care about the local people. If we find petroleum we are obliged first to satisfy the internal market, to meet domestic demand for petroleum in Nicaragua. If we do not find what we are looking for, we will go back home, losing $50 million,” shrugs Conrad. In an altruistic vein, Conrad adds, “We consider the communities, the environment, the people, and our employees to be our highest priority.”
The MKJ concessions are in the offshore Mosquito Basin, specifically the Tyra and Isabel Banks, about 62 miles offshore. Each covers about 988,420 acres. Water depths range from 165 feet to over 325 feet. To date, no exploration wells have been drilled and only limited seismic coverage has been conducted. MKJ is required to complete extensive environmental assessments. The company must perform seismic and geophysical studies prior to drilling any exploratory wells.
The Tyra Bank encompasses a reef, deemed “The Sleeping Giant” by a Norwegian research firm in 1999, that has an estimated a reserve possibility of 7 billion barrels. The potential of the Isabel Bank reserves is estimated at 3.5 billion barrels.
“Potential” and “estimates” are operative words at this juncture in Nicaragua’s energy sweepstakes. Oil and gas activity, except for the current Norwood Resources explorations on the Pacific Coast, has been virtually non-existent for more than 30 years, well before the Sandinista revolution.
“Plugged” and “dry” have been the operative words in E&P (Exploration and Production) since then and even before. In 1978, Texaco capped and walked away from Nicaragua’s last offshore well in the southern Mosquito Basin. A decade before that, Superior Oil sealed and bid adios in 1969 to an onshore well drilled in Rivas.
The alarm clock now rings loud to wake up the civil-war imposed siesta slumber on oil exploration. An energy boom in the near future or more dozing off? Well, it all depends.