The nation's highest oil official, however, says the probe report "would not have a 'significant impact'" on the awards already determined.
ERHC On The Move believes, however, that Sao Tome leaders are being polite when they say they will comment soon, when in fact they don't plan to comment at all.
Prime Minister Maria do Carmo Silveira's response was to "lay it on the table," i.e., in parliamentary terms, close discussion. That term was unfamiliar to oil writers, however, we believe.
Meanwhile, UpstreamOnline's Barry Morgan is out Thursday evening with yet another report:
Sao Tome set to give reaction to report
By Upstream staff
POLITICAL activity in Sao Tome&Principe surrounding the award of acreage in the Joint Development Zone administered with neighbouring Nigeria intensified this week, writes Barry Morgan.
The attorney-general's office in Sao Tome released a report last month calling for a review of the awards process following allegations that US junior ERHCEnergy made "irregular payments".
Prime Minister and Finance Minister Maria do Carmo Silveira said the government will "make its reaction (to the claims) known soon".
ERHC, which has denied any wrongdoing, enjoyed preferential rights in several blocks by virtue of its involvement prior to the creation of the JDZ and, in bidding collaboration with US partners Devon Energy, Pioneer Natural Resources and Noble Energy, won equity ranging from 15% to 65%.
Silveira added that an inquiry into allegations that Foreign Minister Ovido Pequeno had misused¤500,000 ($592,000) of aid money provided by Morocco would get under way soon.
The country has recently been criticised by the World Bank and donors for weak management financial structures.
Sao Tome is keen to get its share of the signature bonuses expected from the five block awards made in the recently completed second licensing round.
The official, Sao Tome Natural Resources Minister Deolinda da Costa, also said Production Sharing contracts which were promised in December and January should be signed "either this month or in February," Platts' Jacinta Moran said.
That's a pretty substantial slippage from the Jan. 11 date forecast in an Energy Intelligence article (the site requires payment) published Sunday:
Sao Tome Clears Way for PSCs
Energy Intelligence
Sao Tome and Principe's Parliamentary Commission on Petroleum Affairs has said that a probe into the controversial second licensing round in the Joint Development Zone (JDZ) shared with Nigeria should not hinder the completion of production sharing contracts (PSCs).
"For us, what was most important was to see the status of the [awards] dossier, the negotiations and see with the government how one could most quickly move forward with the [PSCs] that are underway," the head of the commission, Carlos Neves, told local Tela Non newspaper. "We took care to make public that all questions raised in the wake of the report had nothing to do with our relationship with Nigeria, which is a friendly country with whom we want to maintain the best relations. This has more to do with internal issues of our country," Neves said.
The investigation by the country's attorney general concluded that the second licensing round was "seriously flawed" and failed to meet minimum acceptable standards (OD Dec.13,p4). Winners were announced in June, but no contracts have been signed so far, and two US independents, Devon Energy and Noble, have since withdrawn. The report cited "serious procedural deficiencies and political manipulation." Observers say the PSCs could be signed as early as Jan. 11.
Sao Tome's prime minister, Maria do Carmo Silveira, has meanwhile returned the report to Parliament for further study. "We still don't have a definitive position [on the report]. We are carefully analyzing the situation and we will later make our position public."
The holdup, Moran said late yesterday, lies with the Block 4 PSC, in which Sao Tome has yet to ratify substitution of Addax Petroleum for Noble Energy in the operatorship consortium. Nigeria has already approved the substitution, but Sao Tome's da Costa had a stiff "no comment" on the issue, Moran said.
Platts Commodity News
04-Jan-06 17:21
The government Sao Tome will make public its reaction this month to an official investigation into alleged wrongdoing in the award of five blocks in the Nigeria-Sao Tome Joint Development Zone 2004 licensing round, the island nation's Natural Resources Minister said Wednesday.
Speaking to Platts by telephone, Deolinda da Costa said the government was "analyzing the situation" and would make its announcement this month.
Da Costa also said the investigation into accusations by Sao Tome's attorney general that some of the deals were seriously flawed would not have a "significant impact" on the round, which has been plagued by accusations of corruption. Production sharing contracts with the winners of the five blocks will be signed either this month or in February, he said.
A report published Dec 9 by the Sao Tome Attorney General's Office said several of the companies awarded blocks lacked the technical know-how and the financial muscle to carry out the work, and that the procedures used to select the companies did not satisfy minimum standards.
"The second licensing round suffered serious procedural flaws, including the award of equity to several companies which were either unqualified or which had inferior qualifications in technical and financial terms," the report said.
The attorney general has also called for a US investigation of the award of oil blocks to US minnow ERHC Energy, which was the biggest winner in the licensing round, gaining equity stakes ranging from 15% to 65% in the five blocks, claiming ERHC's participation in the round deterred qualified companies from the bidding.
ERHC Energy, based in Houston and controlled by Nigerian millionaire Emeka Offor, said the report was a "direct attack" on the Nigerian government and said it should take exception to the claim that the round was a failure, as the government of Sao Tome participated fully in all aspects of the process that led to the final award of the five blocks.
CONTRACT NEGOTIATIONS PROGRESSING
A source at the JDA Wednesday said negotiations to finalize the PSCs on four of the five blocks had made "reasonable progress" and that it was now just a question of "dotting the Is and crossing the Ts."
Da Costa, however, said signature bonuses totalling $283-mil, and scheduled to be paid by December 2005, had not yet been received. "Only block 1, Chevron, has paid the bonus," he said.
The draft model PSC under consideration is understood to stipulate a revenue sharing procedure of 80:20 in favor of the oil companies while they are expected to pay a royalty of 5% as well as 50% tax.
The minister, meanwhile, declined to comment on ongoing negotiations for block 4 after Noble Energy, which won a 60% stake, withdrew from the consortium, prompting ERHC to sign a deal with Swiss-based Addax, ceding operatorship of the block.
ERHC Energy last October said it had a memorandum of understanding with Addax to pay Noble's commitment to pay a $90-mil bonus and carry out a three-well drilling program in the first exploration phase.
The JDA source said the Nigerian government had ratified the ERHC/Addax joint venture but that approval from Sao Tome and Principe was still being awaited and that has stalled the final nod to the partnership from the Joint Ministerial Council.
Some studies suggest the Sao Tome and Principe islands, which gained independence from Portugal in 1975, sit on between 6- and 11-bil bbl of crude. Two US oil companies, Chevron and ExxonMobil, in May last year signed oil exploration contracts for block 1. --Jacinta Moran, jacinta_moran@platts.com
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