As usual, ERHC Energy is the scapegoat instead of ExxonMobil and Anadarko Petroleum, the two companies whose lawyers fomented the report Sao Tome President Fradique de Menezes calls a "whitewash" and "incomplete."
The Vanguard headline uses the word "indicted" in the sense of "accused of," not as Westerners familiar with the grand jury system use it, to formally accuse persons and bind them over for trial.
The probe, undertaken by an attorney closely associated with house lawyers for Exxon and Anadarko at the Energy Law Institute and the Tulsa University School of Law - some of whom were his students and other were earlier his classmates - is a brute-force attempt to wrest control of Block 4 from a small Nigerian-owned firm that spent $11 million setting up the Joint Development Zone when few others were interested in Sao Tome's oil prospects. Exxon has used all of its influence to try to destroy the very hardy chairman of ERHC Energy, Sir Emeka Offor, but to date has failed.
Meanwhile, the report ignores bribery allegations subject to the Foreign Corrupt Practices Act that have been leveled at both companies in hearings before the Senate Commerce Committee. The corruption charges stemming from their projects in Equatorial Guinea encompass almost all the players in the Joint Development Zone except ERHC Energy. In addition, ExxonMobil has been charged with evading hundreds of millions of dollars in taxes and operating unlicensed, illegal airports in Nigeria.
Nonetheless, the probe tries to make Offor the bad guy, when in fact he is rather more circumspect than his major-league competitors.
The error-ridden report admitted at the end that it had found no evidence of wrongdoing on Offor's part, but apparently never looked at the efforts by Anadarko to add ExxonMobil as a partner in its bid for the coveted Block 4 of the JDZ after the deadline for bids had lapsed. ExxonMobil sent 24 big-time investment bankers and lawyers to Abuja to argue their case, but the arguments fell on deaf ears and now may never be revived.
Here is the PWYP story from the Vanguard, rehashing charges that have now been rejected three times, including by OPEC President Dr. Edmund Daukoru, Nigeria's oil minister:
PWYP backs inquiry faulting JDZ licensing round ...Nigeria, Sao Tome officials indicted for corruption
By Hector Igbikiowubo
Posted to the Web: Tuesday, January 31, 2006
THE International coalition of the Publish What You Pay (PWYP) campaign and its partner organizations in São Tomé and Principe and Nigeria have voiced concerns about serious flaws revealed by a report into the 2005 bidding round for oil blocks in the Joint Development Zone (JDZ). PWYP have also pointed out that the end result appears to be substantial revenue losses, to the detriment of the people of both São Tomé and Principe and Nigeria.
In a statement released Sunday, PWYP coalition pointed out that an inquiry commissioned by the Attorney General’s Office of São Tomé has concluded that the bidding process was ‘subject to serious procedural deficiencies and political manipulation, including the award of interests to many unqualified firms or firms with inferior qualifications, technically and financially’.
The report’s findings specifically raise the question of whether the Nigerian government is implementing full transparency in the licensing procedures for the JDZ, as per its commitment in the Abuja Declaration signed with São Tomé in June 2004.
More broadly, the report’s revelations sit uneasily with the Nigerian Government’s promise to turn its back on corruption, and reform oil sector management.
The serious irregularities exposed in the report include the following:
- The criteria for awarding licences were vague and did not reflect international best practice. This gave the Joint Development Authority (JDA) and the Joint Ministerial Council (JMC) unusually wide discretion in selecting licensees. Some companies were also given the opportunity to amend their bids during the selection process, in contrast to international industry norms;
- Licenses were awarded to technically and financially unqualified companies. Bids by companies with no prior deepwater drilling experience and/or without the requisite financing were favoured over more credible bids by internationally respected operators, in some cases leading to lower signature bonuses. Due diligence was performed on the licensees only after the final awards had been determined;
- Several representatives on the JMC and the JDA, including officials from São Tomé, had conflicts of interest, holding stock in companies bidding for and receiving awards.
A significant part of the report focuses on Environmental Remediation Holding Corporation (ERHC), whose majority shareholder is a Nigerian oil company.
ERHC holds a highly favourable and controversial contract with São Tomé giving it free options on the country’s oil blocks. This may have deterred international oil companies from entering the bidding round.
The report pointed out that, if enforced, the ERHC contract could potentially result in $60 million in lost revenue in a country whose total annual budget is $50 million.
The enquiry questions the validity of ERHC’s contract and its options, and alleges that this could be the result of political pressure and payments to public officials. It recommends that ERHC’s licenses and contract be frozen until all allegations of corruption have been properly investigated.
It further calls on the JDZ agencies and the governments of São Tomé and Principe and Nigeria to revise the bidding guidelines to observe international best practice, including pre-qualification for competing companies and public disclosure of any conflicts of interest.
The Abuja Declaration was intended to establish a model for contract and revenue transparency in joint development zones: without such transparency, there is no guarantee that revenues from natural resources like oil will benefit all Nigeria and São Tomé’s citizens.
Publish What You Pay noted that it fully supports the Attorney General’s recommendations and calls on the São Tomé and Nigerian governments to take all appropriate measures to implement them. We also call on the US authorities to investigate further allegations that ERHC made improper payments to foreign public officials in order to obtain licenses, a practice that if confirmed would represent a clear breach of the Foreign Corrupt Practices Act (FCPA).