Wednesday, February 01, 2006

Exclusive: Sao Tome's President de Menezes Flies To Abuja For 'Consultations' With President Obasanjo

In a startling and welcome development that could mark the end of disputes and confusion over 2005 Licensing Round block awards in the Nigeria-Sao Tome and Principe Joint Development Zone, President Fradique de Menezes flew to Nigeria Wednesday evening and is meeting now in Abuja with Nigerian President Olusegun Obasanjo, ERHC On The Move has learned.

The Abuja Declaration adopted by the two countries in 2001 to create the Joint Development Zone provides that at all levels, disputes between the two nations concerning awards of oil exploratio0n contracts may be settled at any time by the elected leaders of the two states at their discretion.

With a months-long dispute nearing the boiling point over Block 4, coveted by ExxonMobil and Anadarko Petroleum but won by ERHC Energy in a consortium including Noble Energy on May 21, 2005, the meeting of the two leaders should provide absolute clarity in the complex and costly negotiations.

The key question before them is the award to Houston-based and Nigerian-controlled ERHC Energy and Addax Petroleum of Switzerland of Block 4. Addax was approved as a substitute for Noble Energy, which withdrew last year, by the Nigeria-Sao Tome and Principe Joint Development Authority, and the deal requires confirmation by both countries.

Sao Tome and Principe has balked at giving approval while a probe conducted of the JDZ awards found no evidence of wrongdoing but suggested there was sone on the part of ERHC. Daukoru dismissed the report out of hand and Nigeria refused to cooperate with probers who prepared it.

Today's meeting - probably known to very few - may have been part of the reason for a small but steady improvement in share price over the past week. ERHC Energy shares closed Tuesday at $0.37 after trading as high as $0.385 during the afternoon. The volume, however, was just over 1.3 million shares, consistent with a meeting that was unknown except to the principals and a few of their staff.

News of the meeting came in a note from Mutwadadi, a poster known for the startling accuracy of his infrequent but warmly awaited tips:


President Fradique de Menezes is in Abuja for talks with President Obasanjo. He arrived this [Wednesday] evening and is due to leave tomorrow. Officially, the visit is for 'consultations'.


The timing of the meeting appears to be consistent with plans announced by Nigerian oil minister Dr. Edmund Daukoru, the president of OPEC, for a meeting of the Joint Ministerial Council to sign Production Sharing Contracts in "mid-February," while a Joint Development Authority spokesman is said by a poster on the I-Hub message board to have informed him that the meeting will be "Feb. 6th and 7th or Feb. 9th and 10th."

A Time To Be Prudent

Recently, Mutwadadi has urged investors to be cautious about the outcome of negotiations between the two countries on Production Sharing Contracts. Any outcome of the Obasanjo-De Menezes meeting is possible; the two could decide to go ahead with all awards and the Addax substitution, or abandon all the awards and re-bid. They could even jointly agree to scrap the Abuja Declaration. Nothing can be taken for granted, even if the meeting does seem to augur well for all.

In particular, ERHC On The Move takes this opportunity to warn that pumpers - such as two traders whom we believe repeatedly used the prospect of a JMC meeting to pump up the volume and share price, only to cash in as delays occurred and again late yesterday - may be lying in wait for an opportunity to sell. The two disappeared immediately after the awards and only resumed posting months later as they apparently accumulated more shares.

That "pump 'n dump" routine, which we think was used by the same two traders before and after the May 31 awards, has been the historic fate of this stock. Because the Over The ounter Bulletin Board market is so lightly regulated, they are likely to succeed time and again in this endeavor without being caught.

In summary, we believe that only Production Sharing Contracts that are signed, sealed and delivered are likely to change ERHC's trajectory, and with Mutwadadi, we urge alertness and caution today and tomorrow.

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