Saturday, March 25, 2006

Treating Rumor As Fact, 'The Business" Says Chevron Hit A Billion-Barrel Strike In Block 1, But Financial Times Gets Facts Right

Relying only on a single unnamed source who allegedly said he's seen the closely-held OBO-1 test well results, an online business publication called The Business reported today that Chevron and Exxon have hit a large oil deposit in Block 1 that looks to be a billion barrels in size.

The article by reporter Richard Orange is apparently part of the effort to pump up the price of ERHC Energy, Equator Exploration and other companies that have equity in Blocks 1, 2, 3 and 4, all of which abut Chevron's Block 1 in the Nigeria-Sao Tome and Principe Joint Development Zone. There was no mention of the find straddling other blocks, though.

But contrary to the misinformation that drove share prices up $0.10 in Friday's trading, Chevron reiterated that it would not have results for public release until April. Other wells have to be drilled to determine the true extent of the find, The Business reported.

Pumper Mark St. Amour of Nashville said on the Investor's Hub ERHE Message Board five minutes before the opening bell that the Joint Development Authority told him (on a day when it was closed) it would issue a press release concerning the find on Monday.

But the I-Hub board is regularly censored by Norma Reyolds, the acccountant known as chcr who works for ERHC's largest American shareholder, Houston oilman Phil Nugent. A lawyer that represents both wrote us recently to request that we discontinue mentioning her name, but we felt her role in ERHC Energy's perception by investors is too great to permit such secrecy.

A person familiar with relationship said it was Reynolds, in fact, that bombarded this site with thousands of obscene emails last year at the urging of Nugent, who was offended by our coverage of his role in the GEECF scandal as reported last year by Barron's, the business weekly published by Dow Jones.
That mail-bombing, a violation of the Interstate Commerce Act as well as securities laws, is the basis for a recent complaint to the FBI in Tampa, Fla., which assigned an agent to the case that in turn has recently contacted ERHC On The Move.

Here is the article posted to I-Hub on Saturday, and first published March 22 in The Business:

Chevron and Exxon strike it big in Africa
By Richard Orange
26 March 2006

US giants Chevron and Exxon Mobil have made an African oil discovery that could hold more than a billion barrels worth of oil and gas.

The find promises to be one of the largest finds this year, potentially opening up a new province off the shore of the West African island state of São Tomé and Principe.

A source who has seen the results told The Business that the Obo-1 well, completed on 15 March, had found oil and gas in significant qualities. He said: “It is an encouraging result. Everyone is pleased.”

Geological studies of the prospect suggest it could hold even more oil and gas than the Akpo field in the Nigerian waters to the north, which is thought to have recoverable reserves of more than a billion barrels.

The source said Chevron and Exxon would meet on Tuesday to plan their next moves. He said Chevron, the operator of the field, had not yet decided when it would drill more wells to prove the exact size of the recovery.

There is a severe shortage of oil rigs off West Africa, where the field has been discovered, making it extremely expensive to drill further at short notice.

The companies would not be able to confirm the full extent of the discovery until they had drilled more wells. It took four wells before the full extent of the Akpo field had been proven.

Another source said the consortium was still examining the data and was unlikely to agree on how to release the result until April.

Chevron is the operator of the field with a 51% stake, Exxon holds 40%, with an alliance of Nigerian oil companies Dang-ote Energy Equity Resources and Afren holding the remaining 9%.

The discovery will turn São Tomé into the oil industry’s newest resource-holder. The 160,000 inhabitants of the tiny former Portuguese colony could see their lives transformed in a way that has sadly eluded the inhabitants of the far more populous Niger Delta to the North – so long as São Tomé’s rulers manage to prevent a corrupt few siphoning off most profits.

Campaigners for transparency in oil producing countries were optimistic about São Tomé after the country put into place a petroleum law modelled on that of Norway, with transparency over oil revenues and an oil fund for future generations.

Sadly, the awards of other licences to drill in São Tomé have already shown significant irregularities, with squabbles between Nigerian and São Tomé officials delaying the awards.

A report by São Tomé’s attorney general said the recent bidding rounds were subject to “serious deficiencies and political manipulation”.

São Tomé signed its deal with Nigeria in 2001, after years of dispute over the maritime boundaries between the two states.

Under the agreement, São Tomé keeps 40% of state revenues from any discoveries and Nigeria keeps 60%.

Meanwhile, a well-sourced article from Dino Mahtani of the Financial Times has the the all facts right except our current corporate name:

Sao Tome - where the champagne swills in before the oil gushes out
By Dino Mahtani in São Tomé
Published: March 25 2006 02:00 | Last updated: March 25 2006 02:00

On the tarmac of a sleepy airport on a tiny tropical West African island a private jet unloads boxes of champagne - an early sign that preparations are under way for an oil boom.

The impoverished and aid-dependent archipelago state of São Tomé and Príncipe may be home to only 160,000 people, whose main exports include tourism, cocoa and phone sex lines, but it also sits on one of the world's oil exploration hotspots.

With President George W. Bush keen to diversify US energy needs away from the Middle East, São Tomé could soon become a big factor in US energy policy in the Gulf of Guinea, which already accounts for about 15 percent of US imports.

Any time soon, Chevron, the US oil giant, is expected to announce the results of the first oil well drilled in a joint development zone (JDZ) bringing São Tomé together with neighbouring Nigeria, Africa's biggest oil producer.

Once a disputed territory, the JDZ was born out of a negotiated settlement in 2001, splitting profits 60 per ent in favour of Nigeria and 40 per cent for São Tomé and Príncipe.

With three more contracts signed this month to develop more acreage in the JDZ, São Tomé's politicians, who contest parliamentary elections tomorrow, will be eyeing the $49m (€41m, £28m) initial payment by Chevron and its consortium last year, and the tens of millions more expected from the new contracts. São Tomé's entire national product was an estimated $70.5m last year.

But while some members of the São Toméan political elite prime themselves for a champagne uncorking frenzy, they may simultaneously be considering the damage done to the JDZ's credibility through infighting between lobbies representing different political and business interests on the island, in Nigeria, and elsewhere.

Those involved in the two JDZ licensing rounds in 2003 and 2004 say the haggling could have delayed oil production by several years.

Late last year, São Tomé's attorney-general released an unsolicited report saying the latest licensing round was "subject to serious procedural deficiencies and political manipulation". The report also alleged São Tomé had been pressured by Nigeria to sign off on licensing awards favouring certain business interests. This prompted a fierce rejection by Nigeria.

Over the past few months, three US companies that won licences under the 2004 round to operate oil blocks in the JDZ withdrew from the process after delays over signing contracts. They were replaced by China's Sinopec and Addax, a Canadian listed company with strong ties to Nigeria. The new operators have less experience in offshore drilling than the three US companies.

Binding and at the same time complicating the relationship between Nigeria and São Tomé is the role of Environmental Remediation Holding Corp (ERHC), a small and inexperienced Houston-based oil company.

In exchange for $5m in 1997, ERHC was awarded unusually favourable terms, by industry standards, in São Tomé. Its rights were renegotiated by successive São Toméan governments, but it still took shares in five of six oil blocks awarded so far in the JDZ, as well as exemptions on paying initial signature fees to São Tomé.

Emeka Offor, a Nigerian businessman at the time close to Olusegun Obasanjo, Nigerian president, acquired control of ERHC when São Tomé was in arbitration with the company, just before São Tomé and Nigeria resolved their territorial dispute to create the JDZ.

ExxonMobil, the biggest US oil producer, also acquired favourable rights in São Tomé in the late 1990s, but did not take them up in blocks where ERHC would be present. Pro-Exxon lobbies have subsequently tried to discredit the process.

Political infighting between lobbies representing oil companies may provide the biggest threat to the JDZ. "The disruptive influence is the inherited problem São Tomé has with third parties," said Hassan Tukur, a senior Nigerian foreign ministry official and once a director at the JDZ.

Even seasoned politicians admit the political system is breaking down partly through the effect of inflows of money into different campaigns reflecting divided loyalties on the island. The island has already seen six prime ministers and an unsuccessful coup since President Fradique de Menezes took office in 2001.

A law designed to limit government spending from oil receipts could be the only brake on the political system being completely dominated by cash, which would hobble the ability of any government to function equitably.

No comments: