The article is a bit odd, as Morgan uses the language that "US minnow ERHC Energy this week insisted that it will also at that time 'be informed in respect of its validated options in the blocks'," but that very language was contained in the letter from H.A. Tukur, MFR, Executive Director (F&A) and Secretary of the Joint Ministerial Council, and only quoted by ERHC in its subsequent press release (see excerpt below the Morgan story) last Thursday.
The good news in his article was attributed to Carlos Gomes of Sao Tome, the chairman of the Nigeria-Sao Tome and Principe Joint Development Authority, who said "tax would be levied at a flat rate of 50 percent, with a 50 percent uplift on capital costs," Morgan reported.
There has been a persistent demand from the lower house of the Nigerian parliament for an 80 percent tax on oil revenues, a sharp hike from the 50 percent now in force, and some lawmakers have sought to make their proposed tax retroactive to the JDA contracts for the nine blocks on offer in at least three separate rounds.
Morgan did not offer any specific time for block awards, but his deadline is on Wednesday and developments beyond then are beyond the scope of his article.
Here is the story, posted by avid newshound ruby11 on the ERHE message board at 7:15pm EDT:
Nigeria and Sao Tome council to reveal results of second offering; JDZ poised to show new round hand
by Barry Morgan
23:12 GMT 04.28.2005
ABUJA -- The Joint Development Zone (JDZ) administered by Nigeria and Sao Tome & Principe to govern exploration and production in the deep waters of the Gulf Guinea was aiming to convene its next critical Joint Ministerial Council meeting this week.
Results of the second JDZ licensing round were expected to be announced shortly afterwards.
US minnow ERHC Energy this week insisted that it will also at that time "be informed in respect of its validated options in the blocks" where it has preferential rights. The company has also bid for key licences offered in the round, including blocks 2 and 4 with partners Pioneer Natural Resources and Noble Energy.
Houston-based ERHC president and chief executive Ali Memon said this week that the company enjoys an option interest of 15% with a payable signature bonus in Block-5 and an option interest of 20% in Block-9, also with a payable signature bonus.
ERHC's option interests secured under a bilateral protocol that has been agreed between the two countries also include a 30% stake in Block 2, 25% in Block 4, 20% in Block 3 and 15% in Block 6 all free of signature bonus liability.
Only blocks 2, 3, 4, 5 & 6 are on offer under this second round, for which the highest bids approved by the Joint Ministerial Council are, respectively, $71 million, $40 million, $90 million, $37 million and $45 million, according to Abuja-based Joint Development Authority chairman Carlos Gomes. He said second-round talks actually ended in January.
He said royalties were pegged at a maximum of 5% but "this would be lower for smaller fields, and even 0% is possible for declining fields".
Cost-recovery terms of 80% would kick in after royalties, while tax would be levied at a flat rate of 50%, with a 50% uplift on capital costs, he added.
barry.morgan@upstreamonline.com
Here is the corresponding part of the press release ERHC allegedly "insisted" about:
Mr. H.A. Tukur, MFR, Executive Director (F&A) and Secretary of Council, stated in today's letter:
"Please be informed that the meeting of the Nigeria-Sao Tome and Principe Joint Ministerial Council (JMC) is scheduled for 25th and 26th April 2005, in Abuja, Nigeria. It is after the meeting that the results of the 2004 JDZ Licensing Round will be announced and successful bidders informed.
"ERHC will also be informed in respect of its validated options in the blocks."
We are unsure of the point Morgan is trying to make. It was also unclear why the release focused on ERHC Energy, as there are 26 bidders for the five blocks. One The company is poised to win operatorships in three blocks, Morgan reported several months ago (see Erhc On The Move archives for January).
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