Sao Tome and Principe President Fradqiue de Menezes, in a New Year's address to his nation, said he will speak out "within days" on the report stemming from alleged "irregularities" in the award of five blocks of the Nigeria-Sao Tome and Principe Joint Development Zone to ERHC Energy and other firms.
Photo: Associated Press
The move comes after Prime Minister Maria do Carmo Silveira returned the report to Parliament without comment and Carlos Neves, chairman of the islands' parliamentary Commission on Oil Affairs, declared that the matter was an internal one that should not hinder the signing of Production Sharing Contracts for the 2004 licensing round in which Dow Jones and other financial reporters declared ERHC Energy (OTC symbol: ERHE) "the big winner."
ERHC gained operatorship of two blocks and "significant" equity interests in three others on offer in the 2004 round. If Production Sharing Contracts are perfected, the rights could be worth billions of dollars to the company, which has just three employees, no debt and perhaps even less cash for exploration. If not perfected, the company would be worthless.
Its partners, Pioneer Natural Resources in Block 2 and Addax Petroleum in Block 4, have agrred to pay the company's costs to first oil, an arrangement in which monies for the exploration are expended by the partner and then recovered first when oil starts flowing.
OPEC President and Nigerian Oil Minister Dr. Edmund Daukoru has spelled out several options for Sao Tome, including expropriation of ERHC's rights, purchase of the rights and voiding of the rights. Any of those would provoke a huge legal battle like two earlier ones that delaed awards for years and led to successfully more attractive arbitrated renegotiation of the ERHC Energy rights in 2002 and 2003. It appears most likely, however, that any lessons gleaned from the report will be incorporated by Sao Tome into future oil negotiations to eliminate the "flaws" Pereira and Langenkamp said the found.
Daukoru also said that the probe "called into question" the viability of the treaty establishing the Joint Development Zone, and said the probe "has nothing to do with Nigeria." Nigeria refused to cooperate with the probe's author, oil attorney R. Dobie Langenkamp, a former Asst. Secy. of Energy.
President de Menezes has also hinted that the report is like many others that have raised charges for which there was no evidence. The proprietor of a cocoa plantation on Sao Tome, the President himself told reporters last fall he was personally a target of the probe. In it, Atty. Gen. Pereira asked the government to request a further probe by the U.S. Dept. of Justice and the U.S. Securities Exchange Commission.
Shortly after, this site was visited on least three occasions by the U.S. Attorney's office in Baltimore and by the Commerce Dept. at least twice. Both would have point positions in such a probe, but according to one expert, Nigeria analyst and economist Elias Johnson of the Dept. of Energy's Energy Information Administration, "I've heard people laughing about it around here."
Here is the first of two stories, the first from Agence France-Presse is more objective. The second is slanted by the Portuguese Lusa news agency against ERHC Energy, as has become customary in their coverage. Portugal's own national oil agency might inherit some of the five blocks and others promised by treaty to ERHC Energy in the Sao Tome and Principe Exlusive Economic Zone if the rights are voided by Sao Tome.
Sao Tome president to react to oil award probe 'within days'
Sao Tome and Principe President Fradique de Menezes has vowed a reaction "within days" to a judicial probe into alleged wrongoing in awarding licenses for offshore oil, the Lusa news agency reported Sunday.
"Another issue which will be the subject of a speech which I will deliver within days has to do with the oil sector, specifically the report by the Attorney General's office," he said late Saturday in a New Year's address to the nation, the agency said.
State prosecutors issued a report on December 13 that found offshore oil prospecting deals the government had made in June were "seriously flawed" to the detriment of the west African nation, but details have yet to be disclosed.
"Independently of future developments, it appears to me important not to remain silent regarding an issue which has worried many," added the president of the Gulf of Guinea archipelago, which stands to benefit from an oil boom.
De Menezes himself was investigated like other officials by Attorney General Adelino Amado Pereira's office, and the state prosecutor was tight lipped when he announced wrongdoing in a joint deal cut with Africa's oil giant, Nigeria.
Pereira in mid-December said "recommendations" regarding future oil tenders had been sent to the president, prime minister and speaker of parliament, but declined to comment when asked by AFP if he planned to prosecute anybody.
Media in the former Portuguese colony have said the report suggests a US-registered but Nigerian-funded oil company, EHRC Energy Inc, may have made irregular payments or given other benefits to officials in Sao Tome before the awards were made.
ERHC was awarded control along with another firm over two of the five blocks in a Joint Development Zone (JDZ) shared with Nigeria, and gained significant shares in the other three blocks.
In September, Pereira's office began investigating alleged irregularities in the distribution of the blocks, jointly owned by Sao Tome and Nigeria on a 40-60 percent basis under a treaty signed in 2001.
In November, De Menezes told the Portuguese daily Diario de Noticias newspaper that "no one escapes, not even the president," adding: "There are many accusations, many complaints that are investigated, some go to trial, and then no wrongdoing is found."
Huge oil deposits have been detected since 1995 in the waters off Sao Tome, which has a population of fewer than 200,000 people. Some studies suggest the islands, which gained independence from Portugal in 1975, sit on between six and 11 billion barrels of crude oil.
Here is the less objective Lusa story:
28-12-2005 21:30:00. Fonte LUSA. NotÃcia SIR-7605552
Sao Tome: Gov't reaction to oil award probe "very soon", says PM
Sao Tome, Dec. 28 (Lusa) - The prime minister of Sao Tome and Principe said Wednesday that her government will make public its reaction "very soon" to an official probe into alleged wrongdoing in the award of licenses to operate offshore oil blocks.
Maria do Carmo Silveira, speaking after a meeting with a parliamentary oil commission said: "The government still doesn't have a definitive position on the matter. We are carefully studying the question and will very shortly make public our position".
The cross-party commission of lawmakers has been analyzing a report from the Attorney General's office on possible corruption in the licensing round for the five blocks in the Joint Development Zone shared with Nigeria.
The commission of MPs requested the official report, which uncovered strong evidence of "serious faults" in the May 31 awarding of the JDZ blocks and took two months to prepare.
Details of the probe have yet to be officially disclosed, but media have reported that the document fingers the US-registered but Nigerian controlled ERHC oil firm as having possibly made irregular payments or provided other benefits to officials in Sao Tome before the awards were made.
ERHC was awarded control of two of the five blocks, in partnership with another company, and gained significant shares in the other three JDZ blocks.
Production sharing contracts for these blocks were scheduled to have been signed this month by Sao Tome, Nigeria and the international energy firms involved.
RCN/CJB.
Lusa
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