In Nigeria, Someone's Mad At Big Oil

Paging through the daily Nigerian newspapers Tuesday morning, reading about new laws to sniff out fraud by multinational oil companies, new taxes on them, new demands for environmental remediation and locl engineering content, you can't help but feel that something has gone terribly wrong for the foreign companies that produce and export 90 percent of the oil from Nigeria.

Almost every major Nigerian daily has a story this morning about a new way to extract money, concessions and obeisance from companies that bestride the modern world like behemoths of old, richer, bigger and more powerful than any in the history of civilization.

What has gone wrong?

Ironically, the stories in the Nigerian press are sort of the the hard facts missing from the much more general front-page story in the Wall Street Journal this morning that speaks of the oil giants "limping home" empty-handed from high-stakes negotiations for new oil rights in Libya, Saudi Arabia and elsewhere, beaten in many cases by minnows not unlike ERHC Energy, Inc. - feisty smaller companies who are more willing than the majors to surrender the vast profit margins the majors have always enjoyed and share some of the largesse of oil riches with the nations that own it.

But none of this is really new, or brand-new, anyway. For months, the world's smaller newspapers and little-known industry Websites have been reporting on the moves by a host of oil-bearing nations to get more revenues at the expense of the majors' profits, mainly by making deals with companies that are willing to cooperate with their nationalistic visions.

And it now appears that Nigeria is ground zero for reforms that will take deep bites out of the multinationals' coffers. In the staid Guardian, a new law enacted to combat fraud by the mutlinationals in the oil sector is spelled out in mind-numbing detail on the front page; then there's the announcement of a ban on non-Nigerian offshore engineering design after 2006 in the business section.

On the front page of the Vanguard, John Chaplin, the head of Mobil in Nigeria is struggling to convince the Federal Government that it should pony up an additional $1 billion to fund its joint venture projects or come up short of its planning goals.

An article in the Daily Independent tells readers Nigeria plans to realize $20 billion from oil and gas by 2007, a $6 billion leap from the $14 billion it expects to earn in 2005.

Yet another article traces the costly efforts of Shell to clean up more than 500 oil-contaminated sites, with hundreds still to go.

Big Oil is in trouble in Nigeria

The disillusionment evident in the rejection of preferential rights in the Gulf of Guinea by ExxonMobil in the second licensing round of the Nigeria-Sao Tome and Principe Joint Development Zone seems to have cut both ways. There's a sense that the multinationals who spurned the second round - and left mid-tier U.S. partners tied to ERHC Energy as the leading bidders in three rich blocks - are paying a steep political price.

But across the globe, the same companies are losing ground - and replacement reserves - as more agile, well-funded and technologically innovative companies like Noble Energy and Pioneer Natural Resources scrambble to take their place.

All of this is a positive for ERHC Energy (OTC BB symbol: ERHE) investors, who have a well-connected Nigerian entrepreneur and a veteran Arab oil executive guiding a debt-free company through the minefields of Nigerian politics.

The company is regulated by the United States Securities Exchange Commission and traded on a U.S. exchange and files all required reports with them, but is more than 51 percent owned by Nigerian firms, including one of that country's fastest-rising banks and its major oil services company. Its rights are guaranteed by treaty, and guarantee it a minimum of 560 million barrels of oil worth $28 billion at current prices - and possibly much more.

Yet, even after front-page stories in the Los Angeles Times, the Houston Chronicle and a huge feature in the premium Dow Jones News Wire, it is selling for just $0.62 a share.

The attack on the mutlinationals obviously opens up a huge opportunity for smaller companies with ties to Nigeria, and if it is at the expense of companies like ExxonMobil, ChevronTexaco and Royal Dutch/Shell, that is as much a product of their malfeasance as it is a sign that times and values are changing, creating a new world in which Big Oil may be the big loser - or at least the big target.

Note: ERHC On The Move owns a portfolio of 123,040 ERHC Energy shares.