Monday, February 13, 2006

Guardian: Nigeria, Sao Tome Reject Langenkamp Probe Report

The governments of Nigeria and Sao Tome have officially rejected the 75-page report of a probe into the 2004 Licensing Round of the Nigeria-Sao Tome and Principe Jointm Development Zone by well-connected University of Tulsa professor R. Dobie Langenkamp, the Guardian of Nigeria reported today.

The report, filled with half-truths, errors, old allegations and groundless innuendoes, nonetheless reversed ERHC Energy's steady growth in share price and sent the stock from a high of $0.45 to a low near $0.26 on a single frantic day of trading last Fall.

That day of 13-million plus volume was eclipsed only last week by the 13.5-million share volume on my birthday, Feb. 7, when bad news followed by good news took the price from a low of $0.321 to a high of $0.48 in a single day. The good news included the approval of Addax as our partner in Blocks 2,3 and 4, and the introduction of Sinopec as our partner in Block 2. Sinopec has to get Beijing's approval to proceed, however.

ERHC On The Move fought a pitched battle with those who backed the report, even earning veiled threats of a lawsuit from Langenkamp, who denied a close association with the dozens of corporate house counsel he regularly associates with through the Energy Law Insitute and the National Environmental-Energy Law and Policy Institute.

Today's report in the Guardian follows several others that buried the story of the report's rejection - a major embarrassment for news organizations that had uncritically accepted its conclusions - was the first to forthrightly state the fate of the report in a headline. Here is the updated story in Tuesday's editions:

Nigeria, Sao Tome reject report on second bid

By Yakubu Lawal, Asst. Energy Editor

THE Joint Ministerial Council (JMC) of the oil-rich Joint Development Zone (JDZ) between Nigeria and Sao Tome and Principe has rejected the report of investigation into the second bid round conducted by an American-based Non-Governmental Agency (NGO).

Also, a Nigeria-based Swiss firm, Addax Petroleum has been approved by the council as the operator of Oil Bloc Four in the Gulf of Guinea. This was part of the resolutions reached at the end of the joint council meeting held in Abuja at the weekend.

"Council rejected the report in its entirety and expressed strong displeasure at the insinuations of impropriety levelled against Nigeria and Nigerian Government officials in the report. Nigeria will through the appropriate channels send a detailed representation/response on the report," the resolution said.

Addax replaces United States (U.S.) independent oil firm, Pioneer Natural Resources, which has pulled out from the Joint Development Authority (JDA) consortium with ERHC Energy, the U.S.-based company, in which Nigerian indigenous oil firm, Chrome Energy, has a majority stake.

The resolution stated that "While noting the various stages of progress achieved in the negotiations on the Production Sharing Contracts (PSCs) for Blocs rwo to six, council ratified Addax Petroleum as operator for Bloc Four and also approved Addax as replacement for Pioneer in Bloc Three. It urged the JDA to fast-track the negotiations on all the PSCs with a view to signing the PSCs by the end of February, 2006."

The JMC of the JDA also resolved to convene a meeting on February 28, in Abuja, to consider and approve the PSC guiding operations in the five oil blocks awarded last year.

The council had among other matters reviewed the report of investigation on JDZ second bid round conducted by an American-Based NGO (International Senior Practising Lawyers) at the Instance of the Attorney General of Sao Tome and Principe.

The zone is jointly controlled by Nigeria and Sao Tome and Principe with profit sharing ratio at 60 per cent for the former and 40 per cent for the latter.

President and Chief Executive Officer of ERHC Energy, Mr. Walter Brandhuber, told reporters after the meeting that Addax would be bringing to bear on the consortium, its wealth of experience in oil exploration and production particularly in Nigeria's offshore area.

"The JDA has approved Addax as the operator for block 4. The approval was given last week," Brandhuber said, adding that ERHC had already written to the JDA its readiness to sign the Joint Operating Agreement (JOA) and PSC for the oil block.

A spokesman for the JDA said: "I can confirm that both parties (Nigeria and Sao Tome) represented in the JMC have now approved the Addax operatorship of Block Four".

By the approval, Addax has now replaced all the major American oil firms in the consortium with ERHC Energy in exercising all the rights granted it by the JDA in the five oil blocks awarded last May.

The JDA spokesman said the JMC of the JDA had agreed to reconvene its meeting on February 28, in Abuja, to consider and approve the PSC guiding operations in the five oil blocks.

The Sao Tomean Attorney General had late last year, released a report alleging "serious flaws" in the way the blocks were awarded. He said that several of the companies chosen to explore the JDA blocks lacked the technical know-how and the financial muscle necessary to carry out the work. He added that the procedures used to select the companies, which received concessions contained serious flaws and did not satisfy the minimum standards required for such licenses.

The tiny Archipelago Island also picked holes in the preferential rights granted ERCH Energy, in many of the blocks.

ERHC Energy is a quoted company on the New York Stock Exchange in which a Nigerian indigenous oil company, Chrome, has major equity interest. The country said it would lose about $58 million in expected income if the award to ERHC was allowed to stay.

On the progress report on drilling of JDZ Block One First Exploratory Well OBO 1, the Council noted that drilling of the JDZ 1 Exploratory Well (OBO 1) is progressing satisfactorily without pollution incident and/or accident and that the Well has been logged and 135/8 inch casing ran and cemented with a current well depth of 12,500 feet.

On the Studies for the Inventory of Non-Hydrocarbon Resources in the JDZ, council acknowledged the urgent need for the Non-Hydrocarbon Resources Department of the JDA to commission a survey with a view to determining the inventory and commercial value of the non-hydrocarbon resources in the JDZ and directed speedy action in this regard.

We note that no discussion of the JDA budget was included in the stories we've seen so far of the JMC meeting.

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