Tuesday, December 26, 2006

'Hundreds' Of Bodies In Lagos After Latest Gas Line Explosion

A huge gasoline pipeline explosion in Nigeria's unofficial capital city, Lagos, came hours after people started collecting gas from a rupture in the line that later exploded.

Despite its immense wealth in oil and gasoline resources, Nigeria has been experiencing chronic shortages of both as those resources are exploited by mostly foreign oil companies and Nigerian politicians.

It remains one of the few countries in the world where tens of thousands of people often risk their lives to get a few quarts of gas.

Today's tragedy is yet another failure of the Nigerian government to recognize and correct its official greed and to start sharing its natural resource income with ordinary Nigerians. By all indications, it will not be the last - if the government last that long.

"Hundreds of mangled bodies" fused with one another in a grisly heap were visible in the flames, observers reported. There is no indication of when the fire will be controlled.

Here is the awful story:

Pipeline Explosion in Nigeria Kills More Than 200

Published: December 26, 2006
Filed at 7:57 a.m. ET

LAGOS, Nigeria (AP) -- At least 200 people were killed Tuesday when a gasoline pipeline exploded in Nigeria's biggest city of Lagos, a Red Cross official said. The death toll was expected to rise.

Ige Oladimeji, a senior official for the Nigerian Red Cross, said his workers had documented "over 200 and still counting."

"We can only recognize them through the skulls, the bodies are scattered over the ground," he said. Workers "can't get close enough because the fire is still burning."

Witnesses said the pipeline ruptured shortly after midnight and that people had been collecting leaking fuel in plastic cans for hours before the explosion. It wasn't clear what caused the initial rupture in the pipeline or the later explosion.

Hundreds of bodies could be seen jumbled and fused together in the raging flames at the blast site. Intense heat kept rescue workers back as smoke billowed over the heavily populated Adule Egba neighborhood.

The blast shook the neighborhood after dawn, Nigerian Red Cross spokesman Umar Mairiga said. He said 16 bodies had been taken to the morgue, but raging fires were hindering further recovery. Many people had been injured, he said.

Nigerians often tap into pipelines carrying refined fuel, scooping up the raw product in buckets or plastic bags. Spilled fuel spreading in pools sometimes ignites, immolating people nearby.

In May, more than 150 people died in a similar explosion in Lagos.

Nigeria is Africa's largest oil producer, but corruption, poor management and limited refining capacity often leave the country short of fuel for vehicles and stoves.

Shortages in recent days have prompted hours-long lines at Lagos filling stations.

Wednesday, December 20, 2006

ERHC's Search For New Chief Tech Officer Is Over

ERHC Energy's long search for a replacement for its former Chief Technical Officer - a demanding post now that there are actually rights to explore and immense challenges ahead in exploring them - has ended with the selection of former Aramco technology coordinator James Ledbetter, the company announced in a press release issues just after the market closed Tuesday.

Update, 5:30pm EST, 12/20/06: The good news lifted ERHE shares 9.5 percent by Wedbesday's close to $0.46 Bis and ).47 Ask on double our average volume - more than 1.5 million shares. The stock hit $0.50 for the second time during trading, as we predicted it would back on November 4.

Here is the release, courtesty of publicist Dan Keeney:


ERHC Energy Inc. Appoints Vice President Technical

HOUSTON, December 19, 2006 – ERHC Energy Inc. (OTCBB: ERHE), an independent oil and gas company with assets in the Gulf of Guinea, has announced the appointment of James Ledbetter to the position of Vice President Technical. Mr. Ledbetter begins his duties with ERHC Energy immediately.

Mr. Ledbetter brings more than 25 years experience in exploration and production projects to ERHC Energy. He has an international background, having worked on projects in more than 20 countries, including work in Australia, Europe, the Middle East, North and South America, and the Pacific Rim.

In addition to managing the Company’s relationships with consortium partners and various regulatory agencies in this new position, it is expected Mr. Ledbetter will play a key role in helping ERHC Energy expand its asset base and diversify beyond the Joint Development Zone.

“We are very pleased to have James join us and anticipate he will be pivotal in implementing a focused acquisition strategy that targets a credible portfolio of low- to medium-risk properties,” said Sir Emeka Offor, chairman of ERHC Energy’s Board of Directors. “We sought a person who could help to identify, acquire and manage prospects in which we discern a competitive advantage, and I believe James has the right background for the job. The Board’s goal is to build a significant revenue base that will have a positive impact on ERHC’s profitability for the benefit of its shareholders.”

Most recently, Mr. Ledbetter served as a technology coordinator for Saudi Aramco’s Research & Technology Division, where he coordinated more than 200 technology initiatives. Prior to that, he developed and evaluated the worldwide exploration portfolio for Occidental Oil & Gas Corporation as its chief of strategic planning & economics, worldwide exploration.

Prior thereto, Mr. Ledbetter worked for International Economic & Engineering Consultants, Inc., Kuwait Foreign Petroleum Exploration Company, Capitol Steel & Iron Company, Kerr-McGee Corporation and Cities Service Company.

“As operations are initiated in the Joint Development Zone (JDZ), the depth of experience and international perspective that James offers will be very valuable for ERHC Energy,” said Nicolae Luca, acting chief executive officer for ERHC Energy. “We are very pleased to welcome James onto our management team and look forward to his contribution to the exploration and exploitation of ERHC Energy’s rights.”

ERHC Energy holds exploration rights in six JDZ blocks, consisting of a 22 percent participating interest in JDZ Block 2, a 10 percent participating interest in JDZ Block 3, a 17.7 percent participating interest in JDZ Block 4, and a 15 percent working interest in JDZ Blocks 5, 6 and 9. Additionally, subject to certain restrictions, ERHC holds the right to receive up to two blocks of ERHC’s choice in Sao Tome’s Exclusive Economic Zone (EEZ) and holds the option to acquire up to 15 percent paid working interest in up to two additional blocks of ERHC’s choice in the EEZ.

Mr. Ledbetter earned a Bachelor’s Degree in Petroleum Engineering from the University of Tulsa.

Monday, December 18, 2006

More Fallout Over Starcrest/Addax Deal Touches Chukwueke

Tony Chukwueke, the former Chrome executive and close associate of ERHC Energy chairman Sir Emeka Offor, may be at the center of a new firestorm following his ouster as the head of the Petroleum Ministry last week. A report in an industry intelligence journal, Petroleum Africa, says Chukwueke is being seconded to the Dept. of Petroleum Resources, a former berth, to find out why billions of past-due payments due for non-JDZ blocks awarded in 2005 and 2006 have apparently not been made.

At another angle, however, the story appears to be yet another effort by majors working through Petroleum Africa to indict Offor, a Nigerian billionaire who has been decidedly unpopular with ExxonMobil, Chevron and Anadarko ever since he won a substantial cluster of rights concessions in the JDZ in open bidding last winter and then walked away with choice rights in OPL 291, outside the zone (see my December 1, 2006 post).

In fact, since the story is unsourced - as was the Barry Morgan story in UpstreamOnline that hinted at the same scandal - it is likely that someone from the majors' back office is peddling the story to a variety of publications. There is no indication that doing so has made the least bit of difference, however.

Here's the latest unsourced hit piece:

Nigeria’s DPR in $2.7 Billion Oil Scandal
© Petroleum Africa. All rights reserved.


Petroleum Africa has learned through inside sources that a scandal is about to break in Nigeria’s petroleum industry in regard to $2.7 billion in oil revenue that has yet to be collected from the 2005/2006 bid rounds.

Apparently a special meeting of high level government officials was called last Friday that included President Olusegun Obasanjo, Petroleum Resources Minister Dr. Edmond Daukoru, and Tony Chukwueke, the former head of the Department of Petroleum Resources (DPR). At the meeting Obasanjo was informed that many of the 2005/2006 bid round winners had not yet made payments for their respective blocks; 25 oil blocks were awarded in the 2005 round and 13 in the 2006 mini bid round.

The shocked president directed high-level officials at the meeting to set up a committee to look into the extent of default, and other problems associated with the bid rounds.

An excited Obasanjo gave both Daukoru and Chukwueke a firm directive to recover the money. “Where is my money, where is my money? You have to pay this money. It was in the budget and people are watching,” a panicked Obasanjo reportedly said.

Last month Chukwueke was re-assigned to the Petroleum Ministry over what was commonly believed to be related to the Starcrest/Addax deal for OPL 291. Earlier speculation had it that Chukwueke was to be reinstated, but at this time it does not appear a full re-instatement to DPR is likely for Chukwueke, but rather a return to the DPR to get the accounts in order, so to speak. He will be working with the Acting Director of DPR, Mrs. Chioma Njoku, while he carries out the President’s directive.

Our source postulated: “Industry watchers are beginning to wonder if Chukwueke’s removal last month from the DPR was solely as a result of the controversial Addax/ Starcrest $35m deal on OPL 291, or it is a case of a Pandora’s Box about to be blown open?”

Friday, December 15, 2006

Upstream's Barry Morgan Floats Buy-In Rumor

Barry Morgan, the veteran industry reporter whose hit-or-miss record on ERHC stories is passable but not high, ran another one up the flagpole Thursday night suggesting that a Dubai company called Millennium - where former ERHC CEO Walter Brandhuber is charged with building Millennium's energy portfolio - is interested in "a stake" in the rights that might be acquired by buying some of Chairman Sir Emeka Offor's 300 million shares.

The story offers no supporting information at all, so you have to take it with a grain of (sea) salt. Admittedly, there's been a lot of talk - almost exclusively confined to one Investor's Hub message board - about buy-ins and buy-outs as investors drove the share price up $0.12 on rumors several weeks ago. Nothing came of those rumors, which were similar in most respect to today's, other than some of the smarter players pocketing bundles of cash on the sale of their multimillion-share hoards.

That's a common ploy with the group of players that dominate the board and drive out unbelievers who may demur. Its moderator is a woman who has been ERHC co-founder Phil Nugent's Houston CPA for decades, and it's hard to imagine any rockets getting launched over there without his matches.

If it is more than a plan to snatch your Christmas money, it has eluded our sources. We continue to urge caution, at least until the SEC and FBI wind up their probes.

Here is Barry Morgan's article:

Players in chase for JDZ stake

By Upstream staff

An unidentified US oil player is said tro be among an assortment of investors trying to enter the Nigeria&Sao Tome Joint Development Zone in the Gulf of Guinea by acquiring the shares of Emeka Offor, the Nigerian chairman of Colorado-registered ERHC Energy, writes Barry Morgan.
ERHC holds substantial equity in the play, including preferential rights to blocks 2, 3 and 4 alongside operators Sinopec, Anadarko and Addax Petroleum.

The financial manoeuvre is being undertaken through the Dubai-based Millennium Finance Corporation, where former ERHC chief executive Walter Brandhuber is now fund manager with a brief to build up the energy portfolio.

Investors and Millennium Finance may be angling to take a stake in ERHC, drawn from stock sold by Emeka Offor, the company's largest single shareholder, who is in talks to offload at least half his 43% equity in ERHC.

Offor is facing legal threats by shareholders preparing individual and class-action lawsuits.

Their complaints range from compensation for unpaid fees to the alleged usurpation of corporate opportunity arising from a deal he struck with Addax Petroleum for deep-water acreage through Nigerian independent Starcrest Energy, another company he controls.

ERHC Narrows Loss In 2rd Quarter

A press release form ERHC Energy says that the company narrowed its losses in the 3rd Quarter of 2006 ended Sept. 30, and that year-to-year expenses are also sharply down.

The release follows a November update from CEO Nicolae Luca telling investors that despite the company's cooperation with probes mounted by the FBI and SEC, those continue to eat away at resources better used in developimng its Gulf of Guineau rights.

The Luca shareholder letter last week said the company is looking to exploit opportunities in the GoG as its steers toward budget decisions for its drilling program in 2007. He repeated that theme in Thursday's release.

"Though our successes were overshadowed at times by various challenges, this has been a year in which we made significant strides toward exploiting our assets in the JDZ," Luca said.

Shares on the Pink Sheets lagged yet another day on Thursday, with just over 409,000 traded in a range of $0.40 to $0.42. ERHE closed in the black on a gain of one cent to $0.42.

Here is the press release, courtesy of ERHC publicist Dan Keeney of Houston:


ERHC Energy Inc. Reports Fourth Quarter and
Year End Financial Results

HOUSTON, December 14, 2006 – ERHC Energy Inc. (OTCBB: ERHE), an independent oil and gas company with assets in the Gulf of Guinea, today announced its results for the fourth quarter and year ended September 30, 2006.

As of September 30, 2006, ERHC reported cash assets totaling $41 million.

During the three months ended September 30, 2006, ERHC had a net loss of $1,039.670, compared to a net loss of $2,786,906 for the three months ended September 30, 2005. General and administrative expenses during the fourth quarter totaled $1,569,158, a reduction of $1.2 million compared to the same period a year earlier.

For the fiscal year ended September 30, 2006, ERHC had net income of $23.2 million, compared with a net loss of $11.3 million for the fiscal year ended September 30, 2005. The improvement in net income was the result primarily of a $30.1 million net gain from sale of participating interests in Blocks 2, 3 and 4 of the Joint Development Zone (JDZ) and a conversion of $5.7 million in debt to common stock and income tax expenses. For the year, general and administrative expenses were up 29 percent over fiscal year 2005, mostly due to an increase in legal costs.

“Though our successes were overshadowed at times by various challenges, this has been a year in which we made significant strides toward exploiting our assets in the JDZ,” said Nicolae Luca, acting chief executive officer. “With a solid financial position and strong relationships with strategic partners Addax Petroleum and Sinopec, we believe that we are positioned well for the coming year.”

ERHC Energy holds exploration rights in six JDZ blocks, consisting of a 22 percent participating interest in JDZ Block 2, a 10 percent participating interest in JDZ Block 3, a 17.7 percent participating interest in JDZ Block 4, and a 15 percent working interest in JDZ Blocks 5, 6 and 9.

Monday, December 04, 2006

ERHC Shares Up 38.89 % On No News; Beware Of Buyout Scenario

Shares of ERHC Energy have rocketed upward on stronger-than usual volume from the opening bell this morning, possibly in anticipation of the announcement I said on Friday that coukld come from the Justice Dept., SEC or the company regarding its issues under the Foreign Corrupt Practices Act.

What some investors are being told, however, through the made-up entity "S. Freed" on the subscriber-based, pumpers-only Elephant Fields board, is that Sir Emeka Offor has decided to sell 20 percent of the company for somewhere in the range of $2 per share. This hidden-source rocketry may cost some investors dearly, as the information is almost certainly false, I believe, and their willingness to buy in anticipation of such a deal will be used to clean them out once again.

With the share price at 3:12pm standing $0.50 - now up $0.14, or 38.89 percent, the real certainty to me is that the Justice Dept. has, as we have said all along, found no evidence of wrongdoing by ERHC Energy and will not seek an indictment.

Friday, December 01, 2006

Upstream Article Roils Waters; Some Investors Wary, But Deal Holds Promise

An article in UpstreamOnline that talks about a complex deal involving a company called Starcrest and ERHC Energy and the dilution of ERHE shares has left investors in an uproar - most of them angry at Upstream for what they say is an unfounded new attack on the company.

As we said in our last post, the company was due a $0.05 share price hike after good news on drilling rigs and schedules leaked from the Nigeria-Sao Tome and Principe and Joint Development Authority. The new revelation set off a small wave of selling this morning at the bell, though, with 28,000 shares trading before a buy was made and the price falling from the opening Bid of $0.385 and Offer of $0.39 to $0.365 and $0.375 at 10:08am EST, respectively. Trading is light. Note: We had mentioned a downside in our last column, too.

The article was written by Barry Morgan, who has written frequently about the company in the past. While he is often praised, yesterday's missive - or missile, more like it - detonated a growing stockpile of anger among shareholders who have seen their investment languish for endless months of low volume as the company awaits the next step by the SEC and the Justice Dept. in the Foreign Corrupt Practices Act probe of the company that began last April.

The problem, in short, is that the aticle says ERHC Energy CEO Sir Emeka Offor owns both companies, and by issuing new ERHE shares to acquire all of Starcrest he would then reap those shares, as well, increasing his stake in ERHE from 43 percent to 70 percent.

The deal as outlined is a stroke of genius that may leave his critics awed yet angrier than ever. The prospects of OPL 291 are the caveat in any criticism, though. If ERHC Energy ends up as owner of Starcrest and its rights in OPL 291, and the block as expected pays off in a big strike, the company's fortunes could again soar overnight. The dilution issue would evaporate in that case.

The positive side of the article is that Offor is not sitting on his thumbs while the majors mount their political attacks through the U.S. Justice Deopt. and SEC; instead, he is seeing opportunities and taking them, appearances be damned. That is how billionaires are made.

Here is the article:

Nigeria defiant over its awards Ministry says round followed 'routine practice' but potential future bidders stay wary

By Upstream staff

THE Nigerian Ministry of Petroleum has defended the way it awarded deep-water blocks outside of procedures dictated for last May's mini-round, suggesting "routine oil industry practice" was followed.

Majors bidding for the blocks remain unconvinced, clouding plans to hold another licensing exercise before the end of the year.

The acquisition by Addax Petroleum of Nigerian independent Starcrest's interest in OPL 291 was defended as "in line with the open and transparent bidding for acreage allocation in the 2005 round", according to ministry spokesman Peter Ogbonnaya. The same process will be adopted in future rounds, he said.

Minister of State for Petroleum Edmund Daukoru insisted Starcrest, in partnership with Taiwan's Chinese Petroleum Corporation, qualified to participate in the mini-round, winning OPLs 226 and 294 while Transcorp won OPLs 281 and 295.

India's Oil & Natural Gas Corporation/Mittal Energy tie-up won right of first refusal to OPL 291 but did not submit any bid, leaving the acreage stranded, Daukoru said.

This justified a request by both Transcorp and Starcrest/CPC to swap their own blocks for OPL 291, but Transcorp failed to pay the signature bonus, leaving the way clear for Starcrest/CPC to find $55 million and secure the block.

When CPC withdrew, Starcrest applied to replace its operating partner with Addax. Daukoru's explanation has left industry observers wondering why, if everything was above board, the director of the Department of Petroleum Resources (DPR) Tony Chukwueke was forced out of his job so abruptly two weeks ago.

Neither Transcorp nor Starcrest indicated interest in OPL 291 at the time, nor did they later apply on the floor of the conference to swap their own blocks for the acreage, said a senior executive present during proceedings.

Both companies are alleged to be associated with close business allies of the presidency and to have benefited from secret post-bidding manoeuvres, unwitnessed by other participants.

Faith in the ability of Abuja to conduct fair and open tendering before next April's elections has collapsed, as has morale at the DPR.

Junior assistant director of finance Chioma Njoku has been appointed acting director of the DPR, over the heads of more senior directors such as veteran upstream petrocrats Billy Agha and Olutoye Ibikunle who were deemed to be too close to Chukwueke.

Starcrest is owned by Ibo business magnate Emeka Offor and is under investigation by Abuja's Economic & Financial Crimes Commission.

Starcrest tried its luck with Sinopec after the deal with CPC fell through but the Beijing giant was unhappy with the tight time frame for concluding an agreement on OPL 294.

Addax persuaded Starcrest to instead pursue OPL 291 and in partnership with Starcrest managed to secure terms from the DPR exactly similar to the deal Addax had earlier signed with ERHC Energy in the Joint Development Zone.

At least 43% of ERHC equity is also owned by Offor, who has angled to acquire Starcrest by issuing additional ERHC shares - a move that at one fell swoop would land him about 70% of ERHC stock in the most prospective frontier oil province in west Africa. Minnow ERHC enjoys a key position with Addax in JDZ blocks 2, 3 and 4.

Offor also came under fire this week from Colorado-registered ERHC shareholders for appearing to commit a breach of fiduciary duty by diverting a commercial opportunity for his own benefit, preferring to press the interests of Starcrest rather than ERHC in Nigeria's Exclusive Economic Zone.

Burgeoning disquiet among ERHC shareholders may yet result in a class action derivative lawsuit under US federal jurisdiction designed to prompt Offor to revaluate his acquisition strategy in the Gulf of Guinea.

A spotlight thrown on the world of Nigerian licence allocations at this juncture could dissolve all confidence in the country's upstream policy until a new administration takes charge next May.
01 December 2006 00:01 GMT | last updated: 01 December 2006 00:01 GMT.

What is fascinaing is how incredibly agile Mr. Offor is when it comes to making deals. He had set his eye on two other non-JDZ blocks and won them, but was apparently persuaded by his JDZ partners at Addax to swap them for OPL 291 instead. The winning bid for OPL 291 was from India's ONGC, another crafty player, but ONGC couldn't pay the hefty $55 million licensing fee.
Starcrest's original partner in the bid for the two other blocks (collateral for the swap), Chinese Petroleum Corp., dropped out, and Offor tried to link with Sinopec, a government-owned Chinese company, but it couldn't make a quick decision and Offor replaced them with Addax. With Addax, he got the identical good deal he got from the Swiss driller in their JDZ partnership.

Once again, as other companies faltered, Offor seized the day and came out on top.

That has always been the pattern: In Blocks 2 and 3, he replaced Pioneer and Devon with Sinopec and Addax in a heartbeat, just as he'd earlier replaced Noble Energy with Addax in Block 4. The process, from the outside, looked seamless and brilliant; investors shocked by the Noble defection sold out, and the ERHE share price shot up almost instantly; the same occurred in Blocks 2 and 3, with sharp price drops followed by sharp rises when the malefactors were replaced.

But is that in the cards today and tomorrow?

We're dealing, if you'll permit me to abuse the paradigm of myth, with a many-footed Hydra, and there are thus more than two shoes that may fall. My suspicion is that an announcement on the SEC and Justice Dept. probes is near, perhaps within a business day or two. I expect it to be a positive announcement, but I am not urging investors to bet that I am right. To me, the place to be right now is on the sidelines, watching a fabulous football game in which all the players but one wear sunglasses. If the ball disappears in the sun, he's fried; if the skies cloud over, they are blind.