The article says the PSCs for all blocks will be signed in the middle of December. That is as precise as the timing ever seems to get.
The news is gut-wrenching only because no one knew the JMC - the highest authority in the Nigeria-Sao Tome and Principe Joint Development Zone and final arbiter of all its lease awards - was even planning to meet.
It also follows an intense series of events that included the sudden departure of Noble Energy from the Noble Energy/ERHC Energy consortium, the next-day substitution of Addax Petroleum of Switzerland as Noble's successor, a premature JDA aproval of the new consortium, the subsequent withdrawal of a press release announcing its approval from the JDA Website, the posting and then the withdrawal of two contradictory timelines for PSC signings on the same site, the resignation of ERHC Energy's auditors, and the next-day replacement of that firm with another, more impressive one, Houston-based Malone & Bailey, the third-largest auditor of publicly-listed firms after accounting's Big Six.
The events of the past two weeks had paralyzed trading and stunned investors, who saw the stock's share price drop to $0.331 in intraday trading Wednesday. Now, it appears, all bets are on once again and the stock may resume what had been a promising climb.
The JMC's meetings in the past have been followed by political acrimony, with charges and counter-charges and parliamentary hearings trailing in their wake. This meeting was pulled off without a single leak in Nigeria's highly-charged, very political daily press. So far, there has been no political fallout, and none is expected.
Here is the story by Onyebuchi Ezigbo, a veteran energy correspondent:
Nigeria, Sao Tome Meet Over JDZ Oil Blocs
From Onyebuchi Ezigbo, in Abuja, 11.17.2005
The Joint Ministerial Council (JMC) of the Nigeria-Sao Tome and Principe Joint Development Zone (JDZ), yesterday met to ratify a prototype of the Production Sharing Contract (PSC) agreement that will govern exploration and production activities in five oil blocks recently allocated.
The meeting, which had in attendance Nigeria’s Minister of State for Petroleum Resources Dr. Edmund Daukoru along with his counterpart from Sao Tome, considered the draft proposals on the PSC.
The PSC is a form of agreement where the operating company funds 100 percent of exploration activities in an oil block up to production level. The winners of the five oil blocks are expected to sign the agreement by mid next month.
The draft model PSC under consideration stipulates a revenue sharing procedure of 80:20 percent in favour of the oil companies while they are expected to pay five percent as royalty as well as 50 percent tax.
THISDAY gathered that the fiscal structure of the PSC is essentially the same as the one adopted for Block 1 being operated by US oil major Chevron.
Sources told THISDAY at the end of the closed-door meeting that the formalization of the choice of Swiss firm, Addax Petroleum, as replacement to US independent oil company, Noble Energy, as technical partner in Block 4 of the JDZ, was also concluded.
At an earlier meeting with officials of Chevron, operator of oil Block 1, JDA officials tried to clear all issues relating to commencement of exploration operation.
Yesterday’s meeting of the JMC also intervened in the matter regarding the disagreement between the Noble/ERHC Energy and granted Addax Petroleum Company a stake in the operation of oil Block 4 previously won by Noble/ERHC Energy in the Joint Development Zone, naming Addax Petroleum Company as the new operator.
The approval for the takeover followed disagreement between ERHC, in which Nigerian businessman Sir Emeka Offor owns major equity, and its foreign technical partner, Noble, who won the bid for the operation of Block 4 during the 2004 bid round.
Block 4 was won by the Noble/ERHC consortium. However, trouble began when Noble indicated its unwillingness to continue with the partnership and consequently withdrew from the deal.
Other companies with equity stake in Block 4 include Conoil (20 percent), Hercules Oil (10 percent), Godsonic Oil (5 percent) and Overt Oil (5 percent).
Noble/ERHC, as the operator of the oil bloc, has equity of 60 percent. The winners of the block are to pay a signature bonus of $90 million.
However, due to what officials of JDA described as irreconcilable differences, Noble Oil Company withdrew from the partnership thus paving for the authority to select another firm to take over its place.
Winners of the five oil blocks allocated in the 2004 bid rounds are scheduled to make payment of signature bonuses amounting to $283 million by December 2005.
During the 2004 bid round, Devon/Pioneer/ERHC as the operator with 65 percent equity, won Block 2. The signature bonus for the block is $71 million. Others who got equity in the block were Equator Exploration/ONGC Videsh, 25 percent; A&R Hatman, 10 percent; Foby Engineering, 5 percent and Momo Oil & Gas, 5 percent.
Anardako is the lead operator for Block 3, with 51 percent equity and a signature bonus of $40 million. Others who won equity include Devon/ERHC, 20 percent; DNO/EER, 10 percent; Equinox, 10 percent and Ophir/Broadlink, 4 percent.
ICC/OEOC Consortium is the lead operator for Block 5 with a signature bonus of $37 million. Its equity is 75 percent. ERHC has equity of 15 percent while Sahara has 10 percent.
For Block 6, the lead operator is Filtzim-Huzod Oil & Gas with equity of 85 percent. ERHC has equity of 15 percent in the block.
Of the successful bidders, Devon/Pioneer/ERHC, Devon/ ERHC and Noble/ERHC won the bids as operators including their existing rights. ERHC won their equity for Blocks 5 & 6 plus their existing rights in Blocks 2, 3 and 4.
The first process of acreage allocation in the JDZ began on August 23, 2003. That opened the 2003 JDZ Licensing Round for nine blocks (Blocks 1 to 9).
The first oil block, Block 1, with a surface area of 704 sq. km, was awarded to Chevron as the operator with 51% interest; ExxonMobil and Dangote Equity Energy Resources (DEER) won participating interests of 40 percent and 9 percent, respectively.
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