Thursday, March 09, 2006

At Last, Sao Tome Confirms March 14 PSC Signing Date

In a long-awaited statement that will lend new certainty to prospective and existing investors, the oil minister of Sao Tome on Wednesday confirmed that he will lead a delegation to Abuja on March 14 to "conclude" the long-delayed Production Sharing Contract for Block 4, and, we believe, probably for Blocks 2 and 3 as well, which were not mentioned.

An Afren map of potential reserves in Block 4 shows a huge reservoir of oil which is almost entitely within Block 4, but has may have been explored by Chevron from the very small portion that lies in Block 1 at the midline of the two blocks. Another potential reservoir straddles Blocks 1 and Block 2, where Chinese major Sinopec and the Swiss firm Addax have been approved to join a consortium with ERHC Energy (OTC BB symbol: ERHE).

The Lusa news agency, which has always been slow to be supportive of the Nigeria-Sao Tome and Principe Joint Development process in any way, reported that Sao Tome has obtained the Joint Operating Agreement that cedes 9 percent of ERHC Energy's equity to Godsonic Oil, owned by a Nigerian chief who heads President Olusegun Obasanjo's Peoples Democratic Party.

The Sao Tome delegation had balked at signing the Block 4 PSC at an earlier Feb. 24 meeting without reviewing that document, and the minister said it is now being "analyzed in detail."

Presumably, that analysis could produce objections that might delay the block signing, but that was not the tone of the oil minister's statement or the Lusa report:

Sao Tome: Minister confirms key JDZ oil meet in Abuja next week

Sao Tome, March 8 (Lusa) - Sao Tome and Principe's oil minister confirmed Wednesday that he would lead a delegation to the Nigerian capital next week in an effort to conclude the production sharing contract for Block 4 in a shared area of the Gulf of Guinea.

The government "already has the last version of the document and it is being analyzed in detail", Natural Resources Minister Deolindo da Costa told Lusa.

Da Costa said his team would try to conclude the Block 4 PSC accord at the Joint Ministerial Council (JMC) meeting in Abuja next Tuesday, an objective the two sides failed to reach in an earlier embarrassing attempt on Feb. 24.

The minister's confirmation of the March 14 JMC meeting was the first by Sao Tome.

It had been announced earlier by Nigeria and the Abuja-based Joint Development Authority, the body overseeing the Joint Development Zone (JDZ).

If next week's meeting is successful, Block 4, which carries a signature bonus of US$90 million, will become the first of five JDZ blocks awarded last May to reach formal conclusion.

The Feb. 24 meeting ended embarrassingly, with the STP delegation departing Abuja without signing the PSC and Nigeria's oil minister, Edmund Daukoru, accusing the island partner of bad faith and demanding a public apology.

The archipelago later denied any responsibility for the fiasco and blamed Nigeria for trying to pressure it into blindly signing documents that had been altered at the last minute.

"At no moment did the government of Sao Tome and Principe request any postponement of the production sharing contract signing ceremony for Block 4, nor did it show opposition to the signing of any other contract", the islands' National Petroleum Agency (ANP) said in a communiqué last weekend.

The problem, the ANP said, lay with 11th-hour alterations introduced into the contract by ERHC Energy, a Nigerian-controlled, US-listed company that won preferential interests in all five JDZ blocks awarded in May.

The key snag, the ANP said, was the inclusion in the Block 4 Joint Operating Agreement (JOA) of the acquisition of a 9% interest from ERHC by Nigerian minnow Godsonic.

Houston-headquartered ERHC and Addax of Switzerland have been approved as operators of Block 4.



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