PSC Negotiations Are Delayed, Reuters Reports

The production sharing contract negotiations for the five blocks in which ERHC Energy and other companies are bid winners, slated to begin Aug. 1, have been delayed until Aug. 25 and moved from London to Abuja, the international news agency Reuters reported this morning.

ERHE's share price was unaffected by the news, and continues to trade slowly in the $0.40 range, with volume at 11:04am EDT a low 499,700 shares.

The delay suggested that extraneous issues may play a part in the negotiations. One such issue could be an impending buyout of 51 percent of ERHC Energy shares by Pioneer Natural Resources, its partner in Blocks 2 and 3. That buyout rumor has been dismissed by ERHC Energy management but has persisted since part of it appeared in an article by prize-winning oil inustry writer Barry Morgan in the trade journal UpstreamOnline.

The negotiations are still slated to come to fruition by mid-October. The Nigeria-Sao Tome and Principe Joint Development Authority also told companies to have their joint operating agreements complete for review by Sept. 30.

In a speech to bid winners by Engineer S.U. Obiorah on July 21, the JDA's new director said "one is even tempted to conclude that we may even be able to conclude negotiations of the PSCs earlier than schedule."

Here is the Reuters story:

Nigeria-Sao Tome delay oil contract talks
Thu Jul 28, 2005 8:19 AM GMT

LAGOS (Reuters) - Nigeria and Sao Tome have deferred contractual talks with winners of five oil blocks to give the consortia more time to study documents, the Joint Development Authority (JDA) said on Wednesday.

The JDA, which administers the offshore area in the Gulf of Guinea on behalf of the two countries, awarded five offshore exploration licences in May after a turbulent five-month selection marred by disagreements and accusations of corruption.

"In a bid to give the contractors more time to review the production sharing contract preparatory to negotiations, the meeting earlier scheduled to hold in London from August 1, 2005 has been postponed," the JDA said in a statement.

According to a new timetable, negotiations with the winning consortia will take place between August 25 and September 8 in the Nigerian capital Abuja.

The JDA said consortia were expected to submit their final comments on the contracts, focusing on specific issues relating to individual blocks, by September 16. It said that the contractual terms used for the five blocks would be the same as those agreed for the first block with Chevron. It hopes to conclude these deals by mid-October.

The JDA advised the consortia to proceed with their joint operating agreements among the bid partners and to submit these by September 30.

The Gulf of Guinea has become one of the world's exploration hotspots since a series of huge oil finds in the last 20 years.

This was the second licensing round, made necessary when the first was aborted after just one exploration contract was awarded to Chevron for $123 million.

The world's eighth largest oil exporter and Sao Tome set up the JDA in 2000 to administer the offshore area after signing a treaty ending a protracted maritime border dispute.

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