Wednesday, February 08, 2006

JMC Approves PSC Signing on Feb. 28 or 29, Condemns Sao Tome Probe Report

Here's the latest from Platts' Jacinta Moran on the end of the Nigeria-Sao Tme and Principe Joint Ministerial meeting, which has touched off a wave of heavy buying that outstrips selling 4:1 on volume of 1,834,615 shares at 11:44a.m.:

A Joint Ministerial Council meeting of the Abuja-based Joint Development Authority, set up to administer licensing of offshore exploration acreage shared by Nigeria and Sao Tome, ended Wednesday with a date set for the signing of contracts covering five blocks awarded in the recent second licensing round.

"The JMC meeting has just ended and they have agreed to meet again on the 28th (February)... The PSCs should be signed on either the 28th or the 29th (sic)," a spokesman for the JDA said.

The JDA has been under pressure to set a date for the signing of the contracts--covering blocks 2, 3, 4, 5 and 6 - awarded in bidding round plagued by allegations of corruption, delays and political wrangling in the tiny island nation of Sao Tome.

Dallas-based Pioneer Natural Resources Tuesday said it had notified the JDA that it was withdrawing from participation in blocks 2 and 3 in the latest blow to the round conducted last May.

Both Noble Energy and Devon have also pulled out of negotiations.


ERHC President and CEO Walter Brandhuber told Platts Tuesday that ERHC had lined up China's Sinopec for block 2, in which it and Pioneer had a 65% stake and were the operators.

"We are currently discussing and putting final touches to agreements that will see Sinopec join the ERHC/Addax consortium in block 2. We have also indicated this to the JDA, but until we sign a final agreement, then we can make presentation to the authority," Brandhuber said.

An industry source familiar with the Joint Development Authority said Wednesday said that the replacement "is under consideration." "A decision will be taken in due course," he said.

The industry source also said Swiss-based Addax Petroleum may take equity in block 3, where Pioneer and ERHC had a 25% stake.

The JDA recently approved Addax Petroleum's replacement of Noble Energy as ERHC's partner and operator in block 4.

Noble Energy and ERHC were awarded a stake in block 4 after Noble offered a front-end bonus of $57-mil along with a pledge to drill three wells during the first exploration phase of four years. Its rival, Anadarko, had offered a much higher bonus of $91-mil, but committed itself to drilling fewer wells over a longer period of time.

The second licensing round, which attracted signature bonuses totaling $283-mil, saw ERHC Energy, which is controlled by Emeka Offor, a wealthy Nigerian businessman, granted preferential rights to equity stakes varying in size from 15% to 30% in six offshore blocks based on the company's agreement with Sao Tome as compensation for exploratory works carried out earlier.


The JDA spokesman said Nigeria's oil minister Edmund Daukoru and Sao Tome representatives at the JMC meeting had "disowned" a report by the Sao Tome attorney-general concerning alleged irregularities in the contract awards.

"It is not the official position of the government of Nigeria or the government of Sao Tome," he said.

The report published Dec 9 by the Sao Tome attorney-general's office said several of the companies awarded blocks lacked the technical know-how and the financial muscle to carry out the work, and that the procedures used to select the companies did not satisfy minimum standards.

The attorney-general has also called for a US investigation of the award of oil blocks to ERHC, claiming the US minnow's participation in the round deterred qualified companies from the bidding.

ERHC has denied the allegations and said the company had no contact with any Sao Tome officials throughout the bidding process.

The award of second batch of blocks attracted signature bonuses totaling $283-mil. Under the terms of a treaty signed in 2002, Nigeria, which is already Africa's largest oil producer, will take 60% of all oil and gas revenues, with Sao Tome receiving 40%.

--Jacinta Moran,

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