Monday, February 27, 2006

Sao Tome Must Issue Public Apology To Nigeria Over Block 4 Incident, Daukoru Tells ThisDay Online; Says Chevron Hit Oil; We Plan To Sell And Buy Back

An article in ThisDay Online today says Nigerian oil minister and OPEC President Dr. Edmund Daukoru is demanding an apology from the government of Sao Tome and Principe for the failure of its delegation to the Nigeria-Sao Tome and Principe Joint Ministerial Council meeting in Abuja last Friday to sign the Production Sharing Contract for Block 4 as planned.

ThisDay Online said nothing about a rescheduled signinjg ceremony, which rival daily Punch of Nigeria said would take place in mid-March. ERHC On The Move cosiders that informnation to be completely false, reflectng only an effort by the ever-optimistic Joint Development Authority to put the best possible face on what is clearly a major break in relations with respect to the JDZ.

Oil executives from around the world, dignitaries and the press had all been invited to the signing ceremony, which had to be rescheduled from an 11 a.m. to 8 p.m., when discussions evaporated "at the last minute" into hostility as the Sao Tomean delegation demanded more time for review of the Joint Operating Agreement that underlies the production contract.

Advance copies had been circulated before the meeting that included a request for comments and ample time to work out differences, he said. The result was a major embarrassment for which Sao Tome must apologize, the new OPEC President said.

But the question of apologies cuts both ways.

Daukoru's branding of DRSTP as "bad business partners" may have inflicted a wound that is wide and deep and resists quick healing. As Dr. Daukoru said, "I am an oilman, not a diplomat."

Thus, absent an apology from Daukoru, too, as well as precipient action by Nigerian President Olusegun Obasanjo and Sao Tome President Fradique de Menezes, ERHC On The Move sees no short-term resolution to what is clearly a deeply fractured relationship.

Given that quandary, ERHC On The Move is intending to sell all its shares of ERHC Energy at market at the opening in New York this morning. This blog will continue, however, and we expect to repurchase shares at the best possible moment.

Here is the JDZ story:

THISDAY JDA: Nigeria Demands Apology from Sao Tome
From Onyebuchi Ezigbo in Abuja, 02.27.2006

Federal Government has demanded a public apology from the government of Sao Tome and Principe over its last minute pull-out from a scheduled oil contract deal at the weekend.

The event was the signing of a Production Sharing Contract (PSC) with Addax and other consortium winners of Block 4 of the second batch of the 2005 oil licensing round put out under the JDZ collaborative initiative.

The incident, which resulted in the postponement of the signing ceremony for the Production Sharing Contract (PSC) between the two state parties and winners of Block 4 of the oilfield awarded in the 2005 Joint Development Authority (JDA) licensing rounds almost caused a strain in the six-year old Joint Development Partnership between the tiny island territory and Nigeria.

All the parties had gathered at the headquarters of JDA in Abuja by 8 PM, Friday night, after the event was shifted from the earlier time of 11.30 am, to witness the signing ceremony but rather than have the signing of the agreement proceed as expected, officials from Sao Tome surprisingly asked for the postponement of the ceremony to enable them have another look at the draft PSC agreement and the Joint Operating Agreement (JOA).

Nigeria's Minister of State for Petroleum, Dr. Edmund Daukoru, who broke the unpleasant news of the cancellation of the signing ceremony to all the parties, expressed displeasure at the turn of events - especially the continued dragging of feet on the oil deal by Sao Tome.

An American Oil firm, Environmental Remediation Holding Company (ERHC), whose majority shareholder happens to be Nigerian, Chief Emeka Offor, won the operatorship of bloc 4 and has recently entered into joint operating partnership with Addax oil company. The other companies having stakes in the bloc include, Conoil with (20%), Godsonic Oil Ltd (5%), Hercules (10%) and Overt (5%).

While absolving Nigeria of any responsibility for the disappointing show, Daukoru said the country would require a public apology from Sao Tome government over the incident.

He said FG considered the incident a major embarrassment which the government of Sao Tome and Principe would have to issue an apology for.

The obviously displeased minister regretted the inability to consummate the Block 4 agreement as scheduled, saying that the action is not sending the right signal to investors.

"It is a terrible thing, it is not good. This does not send the right signal to investors. I cannot even quantify the loss in terms of the bad image it has created", he said.

"I feel very sad today, I am an oilman, not a diplomat. Oil business is not run in this manner. I really feel the authorities of Sao Tome have to issue a apology on this", he said.

He said there was no real justification for the request for the postponement, adding that before now, Sao Tome and Principe has asked for more time to enable them careful study of the draft contract agreement which "we bended over to allow".

The Minister said prior to the scheduling of the event, copies of both the PSC and JOA agreement were circulated to all parties with request for comments and and enough time for differences to be resolved.

The minister said he does not think fundamental change will be made in the PSC which is modeled out of the one signed by bloc one operator, Chevron.

Daukoru recalled the protracted nature of the process of negotiations leading to the award of the oil blocs at the end of the 2005 licensing round, which he attributed to the "peculiar nature of relationship between Nigeria and Sao Tome and Principe".

Expressing concern on the market loss this continued delay is bound to bring about, Daukoru said with regard to Block 1, operated by Chevron, the operators have reportedly hit a first oil in the field, which meant that they would benefit from the current high oil prices.

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