Awards Delayed As Presidents Wrangle, Paper Says

The Punch of Nigeria delivered a low blow to readers Monday morning in Africa, saying that the Nigeria-Sao Tome Joint Development Zone awards were delayed by disagreements between Nigerian President Olusegun Obasanjo and Sao Tome and Principe President Fradique Menezes.

The article was written so poorly and so thoroughly conflated two different licensing regimes that it could not be determined by a thorough reading exactly what tense the JDZ disagreement was in and whether that part of the delay was ongoing.

Awards of the six blocks in the JDZ were expected at the end of December, reset for the end of January, then set again for the end of February; a bidding round for 80 blocks owned exclusively by Nigeria was once set for late January and then for late February, but are now on hold until at least early March, the article appeared to say. That round had always been secondary to the JDZ round, and officials have long indicated that they hoped to complete it before the Nigerian round begins.

While the article carried the faint suggestion that no resolution ofthe JDZ bids was in sight, it repeatedly referred to only four blocks being on offer, as opposed to the five that were in fact offered, and at critical moments fails to reveal whether its author is referring to events in the past, present or future. That suggests the writer is not very well-informed about the bidding or the topic.

To some, it will appear that the purpose of the article is to allow prospective buyers to purchase more cheap shares after the price rose sharply in Friday's late trading. That may be a fair interpretation.

To others, it is evidence that the two governments are still in disagreement about what blocks should be awarded and to whom. The mention of four blocks could carry with it the suggestion that Block 6, which attracted only one known bidder, will be rebid in a third round with Blocks 7, 8 and 9.

My conclusions appear below. Here is the story:

Oil blocks: Presidential approval delays bidding
Michael Faloseyi
The Punch, Feb. 28. 2005


ABUJAThe annual bidding for oil block licences earlier scheduled for last week could not hold, following the failure of President Olusegun Obasanjo to give his approval.

Inability to secure presidential approval also led to the delay in the announcement of the winners for the four oil blocks placed on offer in the Joint Development Zone of Nigeria and Sao Tome and Principe.

A source in the Ministry of Petroleum Resources on Friday, confirmed the development and said that the 2005 oil block bidding was tentatively billed for the last week of February.

However, our source said, “following our inability to secure the presidential approval to advertise for the bids, the February date has become unrealistic, but we hope to get the approval very soon.”

The source was hopeful that the bids might be held in March when the approval of the president would have been secured.

“All the technical details have been concluded and passed to the President. We are expecting his approval and I believe that the bid would be opened within this first quarter since we have missed the February date,” source said.

The 2005 bidding rounds promised to be the largest ever in Nigeria with about 80 oil blocks spread across the inland basins, the Niger Delta region, deep and shallow offshore put on offer.

It was, however, not certain, if the planned digital bidding system that the Nigerian National Petroleum Corporation planned to establish as part of the reorganisation, dubbed, “Project Pace,” would be ready before the bids open.

Group Managing Director of the NNPC, Mr. Funsho Kupolokun, had in December 2004, said that awards of contracts in the Nigerian oil and gas industry would be done through Internet bidding system as from this year.

The corporation had in January, sent some of its top officials including a Group Executive Director, to Petrobas, Brazil’s state owned oil firm, to understudy how digital marketing is done.

However, sources in the corporation said on Friday that work was still going on on the website and how to ensure the system is run effectively.

Meanwhile, two months have elapsed since the promise by the Presidential Adviser on Petroleum and Energy Matters, Dr. Edmund Daukoru, to make public winners of the four oil blocks put on offer in the JDZ.

The source in the Ministry hinted on Friday that the winners would still be announced after the Presidents of both countries agreed on the details of the short listing done by the technical team that assessed.

The last paragraph is probably the best clue to the meaning of the story. It seems to say that while a "short list" of winners is complete, the two presidents are at odds as to which will be accepted. It has been known for some time that Sao Tome and Principe favored the highest bidders, while Nigeria tended to support those with the most technical capacity to get the drilling in deep offshore waters done.

The most important part of that paragraph is the phrase "after the Presidents of both countries agreed..." That conveys the sense that the Presidents had agreed on the "details of the short listing," which presumably (in the Western sense) includes both winners and non-winners.

However, the entire first sentence is cast in the subjunctive, framed by the word "would," and therefore no firm conclusions about its actual meaning are possible.

I could well be wrong, but I think this article is intended to precipitate selling so that those too late to the party can still gain entrance. Nonetheless, since Sam Dimka's suggestion that ExxonMobil's preferential rights selections - if made last Friday - would trigger awards on Thursday or Friday was also conditional, I am less convinced than I was that awards will still be made this week.

The new date for the Nigerian blocks offered by the author - "within the first quarter" - is novel, so new information may have been obtained by this writer. The quarter, of course, end on March 31, so it is another way of saying "the end of March," just as earlier the phrase was "the end of January" and "the end of February." And we have been given to believe that the closure of the JDZ round and the opening of the Nigerian round will happen at the same time.

The political situation in Nigeria is deteriorating, and if the paralysis extends even a month further, the second bidding round may not be completed for three or four months at the earliest. In that same event, some multinational oil firms may begin to abandon Nigeria altogether, as they are under fierce attack and gaining little support from the government that is supported largely by their royalties. This defies common sense, but politics always has.

Another article, in This Day Monday morning, says that now ExxonMobil is the hold-up, not the presidents as The Punch article states. It also gives an extra 15 days beyond what we were told before for the company to make its choices.
That article is at http://www.thisdayonline.com/nview.php?id=10610
I think it is a good sign that, at least in The Punch, ExxonMobil is no longer painted as the source of the delay, unless the entire purpose of the article was to absolve ExxonMobil of any role it may have had in delaying the awards thus far. Moving the blame from the company to the presidents would insulate the company from blame while putting the delay in the political realm, which is moved by nationalism and sometimes bribery.

But if the company is in fact no longer the hold-up, there is reason to believe that the presidents are less inclined than anyone to further delays. President Obasanjo himself was rumored by a Raging Bull poster to have taken a personal interest in moving the process towards a conclusion.

However, President Menezes is not so badly in need of money as he was four weeks ago, when the first Production Sharing Contract was signed and Sao Tome received a substantial check for its share of the $123 million signature bonus fee and there has been no indication at all that he is anxious to end the suspense.

It is also uncertain whether the newspaper was hoping to discredit either president with the article suggesting that they are responsible for delays. Both Obasanjo and Dr. Edmund Daukoru, to whom it has fallen to make the three false predictions so far reported, appear in candid photographs accompanying the article. Daukoru is somewhat redeeemed by the piece, which does not engage in overt finger-pointing, however.

Finally, the article seems to be setting the stage for a lengthy delay without knowing whether one is either wanted or necessary. Should the awards be announced this week, the article would not have been wrong; should they be announced four months from now, it would still not be wrong.

This ambivalence is intentional, moreover; the article seeks to create uncertainty in place of the positive expectations of thousands of investors around the world whose hopes and dreams are married to the companies involved. It is saying to those investors, "Wait and worry some more; we're not sure when things will be straightened out."

To me, the response to that message is to ignore it, as it carries no new information, and to worry if you are so inclined. I am not so inclined; I believe announcements will come "two weeks" from now, as always.