Friday, February 24, 2006


Bad news from Reuters:

Nigeria blasts Sao Tome after failed oil signing

February 24, 2006 15:40:35 (ET)

ABUJA, Feb 24 (Reuters) - Nigeria's Minister of State for Petroleum Edmund Daukoru called Sao Tome a bad business partner on Friday after the African countries failed to sign a long-awaited production sharing contract with oil companies.

Nigeria, Africa's top oil producer, and the tiny twin island nation of Sao Tome and Principe, which has not yet started producing petroleum, have a joint development zone in Gulf of Guinea waters, one of the world's oil exploration hotspots.

"This is very, very embarrassing ... It is not good. It does not send the right signal to the outside world in terms of doing business ... This is not how to do business and Nigeria is not happy about it," Daukoru said after an aborted signing ceremony.

It was not immediately possible to obtain comment from the Sao Tomean authorities, while officials of the Joint Development Authority (JDA), which administers the deepwater area the partners share, declined to comment.

The JDA had been due to sign a production sharing contract for Block 4 with Houston-based ERHC, which is controlled by private Nigerian company Chrome, and its partner Swiss-based energy firm Addax.

Daukoru said the signing fell through at the last minute because the Sao Tomean authorities wanted to further scrutinise the joint operating agreement between ERHC and Addax.

"Whatever the partners do internally is not the business of the state partners (Nigeria and Sao Tome) ... I cannot even quantify the loss in terms of the bad image this has created, even the monetary value," he said.

The block is one of five that were awarded last May after a turbulent five-month delay plagued by disagreements between the countries and accusations of corruption.

The period since the blocks were awarded has been equally turbulent.

The JDA originally said production sharing contracts on all five blocks would be signed in September. But several partners have dropped out of the winning consortia, delaying negotiations.

In addition, more allegations have surfaced that the process of awarding the blocks was tainted by graft, including a critical report by Sao Tome's attorney-general. Daukoru has dismissed that report as internal politics of Sao Tome, which has elections coming up later this year.

As Sao Tome prepares to enter the world of big oil, political tensions have emerged. President Fradique de Menezes survived a coup attempt in 2003 and there have been several high-profile resignations from the government.

As we had predicted some time ago - saying at PSCs the price would be $0.73 - the closing price after hours was $0.732 x $0.733 although the last sale was at $0.74. ERHC On The Move sold 8,200 shares at around $0.745 near the close.

Closing volume for this painful day was 6,228,079.

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