Nigerian Newspapers Report Exxon Decision - Very Differently

Several days after the fact, and before the Nigeria-Sao Tome and Principe Joint Development Authority has even managed to put a press release on its Website, This Day and the Daily Independent, two leading Nigerian daily newspapers, have finally reported what the Dow Jones News Service revealed last Friday: The current round of Joint Development Zone licensing is a "no go" for multinational giant ExxonMobil.

The stories are markedly different in emphasis, though. The Daily Independent focuses on what the company may have told the JDA about using its options in future licensing rounds, a possibility suggested first in UpstreamOnline by Barry Morgan and later here.

Here is the Daily Independent piece by veteran oil writer Bassey Udo:

ExxonMobil reserves rights on JDZ oil bloc
by Bassey Udo, Energy Editor

LAGOS -- After weeks of suspense, American oil giant, ExxonMobil, expected to exercise its rights in two of the five oil blocs on offer in the 2004 Licensing Round of the Nigeria-Sao Tome and Principe Joint Development Zone (JDZ) on Monday opted to reserve any such rights.

The Joint Development Authority (JDA) December last year put on offer five oil blocs – 2, 3, 4, 5 and 6 of the JDZ for which 23 prospective companies staked over $60 billion in 26 bids.

Following the conclusion of consultations between the Nigerian and Sao Tome’s authorities on issues concerning the 2004 licensing round, the JDA last month notified ExxonMobil to move within 30 days to exercise its pre-emptive rights to pave the way for the final appraisal of the bids and announcement of the result by the Joint Ministerial Council (JMC).

Following the expiration of the deadline last Friday, the company expected to exercise its rights in blocs 2, 3 and 4 in the zone, however, opted to hold back on such rights, thus ending the planned announcement of the final bid result, which could [have] been held later this week.

A terse statement on Monday in Lagos said inter alia: “We confirm that ExxonMobil has elected not to exercise its rights to participate in additional blocs that may be awarded pursuant to the current tender round in the Joint Development Zone of Nigeria and Sao Tome and Principe”.

ExxonMobil, however, confirmed it is retaining its right to participate in the development of the premier Bloc-1 scheduled to commence production later this year.

The company, through its subsidiary, Esso Exploration and Production Nigeria-Sao Tome "One" Limited, holds 40 per cent stake in the bloc operated by ChevronTexaco, through its subsidiary, ChevronTexaco JDZ Limited (51 per cent) as a Joint Venture which also involves Dangote and Energy Equity Resources (DEER) Limited (9 per cent).

When Udo uses the phrase "ending the planned announcement of the final bid result, which could [have] been held later this week," he seems to be saying there will be no awards announcement. But the Joint Development Authority, thankfully, has spelled out April 22, Friday after next, as the long-awaited date certain for awards.

It's a different story over at This Day, which says that the awards are coming "very soon."

This Day also quotes the press release from Exxon, but adds the words of an unnamed ExxonMobil official saying the development costs were too high for the company - which has a $25 billion cash surplus.

As usual, the piece is riddled with errors, including one that veteran oil journalist Mike Oduniyi should have avoided. He identified a competitor for Block 4, ECL International, as an American firm.

While there is an American firm of that name in Louisiana, the real ECL International is a Nigerian company. More in his familiar role as Conoil promoter than reporter, Oduniyi said that the decision leaves Conoil and ECL International battling for control of Block 4.

To the contrary, most reporters have said ERHC Energy and its partner, Noble Energy, which have proposed drilling three wells in one year in Block 4 if they get operatorship, are vying with U.S.-based Anadarko Petroleum for the block. Earlier reports said Anadarko and ExxonMobil had proposed a deal to the JDA which the Authority rejected.

Like a piece the same reporter did several weeks ago that produced a $0.19-cent drop, this one must be taken with great caution and many - not just one - grains of salt with respect to its suggestions regarding Conoil.

Here is the latest piece, from This Day's Tuesday morning edition:

JDZ: ExxonMobil Turns Down Oil Block Offer
by Mike Oduniyi
April 12, 2005

LAGOS -- ExxonMobil has turned down the offer to take up 25 percent equity in oil blocks in the Joint Development Zone (JDZ) of the Gulf of Guinea, under the 2004 Licensing Round organised by Nigeria and the Republic of Sao Tome and Principe.

By virtue of an agreement reached by all parties with interest in the JDZ, the US oil major has preferential rights to three of the nine blocks. The company exercised its rights by claiming 40 percent interest in Block 01, awarded last year by the JDA.

Final decision on the award of five oil blocks put on offer by the Joint Development Authority (JDA), the body managing hydrocarbon resources within the zone on behalf of the two countries, had been delayed as the agency awaited ExxonMobil's response to the rights offer.

The JDA, which last November called bids for the oil blocks named 02, 03, 04, 05 and 06, was initially expected to announce the winners in January this year. This was shifted to allow ExxonMobil exercise its preferential rights.

"We confirm that ExxonMobil has elected not to exercise its rights to participate in additional blocks that may be awarded pursuant to the current tender round in the Joint Development Zone of Nigeria and Sao Tome and Principe," the company said yesterday.

A senior company official cited economic reasons for turning down the offer. "It is for business reasons. We looked at the costs (of exploration and drilling) and the gains," said the official.

The company added that it was retaining its 40 percent interest in Block 1 that was awarded in April 2004. Other partners in the block regarded as the most prolific in the zone are Dangote-Energy Equity Resources (nine percent) and ChevronTexaco, 51 percent.

A JDA source said yesterday that ExxonMobil was actually given up to the end of last week to exercise the rights. The source said the latest development meant that the Joint Ministerial Council (JMC) would be meeting very soon to take a decision on the awards.

Analysts said yesterday that ExxonMobil pulling out of the contest, should pave the way for a straight contest between Nigeria's leading indigenous oil production company, Conoil and another US oil firm, ECL International, which are targeting Block 04.

Conoil has offered to pay $150 million (N20 billion), while ECL International offered $175 million.

In a late-breaking article from Reuters, available in the comments section below, ExxonMobil repeats the information it gave to This Day and ERHC Energy is mentioned as another firm that got the same kind of rights for services performed before the Nigeria-Sao Tome and Principe Joint Development Zone was created.

The new round of stories did depress the price by $0.02 cents during market trading Tuesday, despite the fact that it boosts ERHC's chances of gaining operatorships in three coveted blocks.

The volume Tuesday was 1,074,104 shares, approximately the same as yesterday's. In Tuesday's action, though, sell orders outpaced buy orders by 594,584 to 427,070, while the number of trades - 194 - was almost identical to yesterday's 198.