Back with a bang, the publication is the first to publish a date certain for the signing of Production Sharing Contracts with Anadarko Petroleum for Block 3 in the Nigeria-Sao Tome and Principe Joint Development Zone, which has been delayed by political disputes in Sao Tome over Block 4, in which ERHC Energy has become a political football.
The newsletter says the Anadarko/ERHC/Equinox/EER/Ophir consortium will be signed on Jan. 16.
In one glaring misstatement of fact, though, the newsletter attributes false information to new OPEC President Dr. Edmund Daukoru. The newsletter says "He advised São Tomé that Nigeria had never acted on ERHC’s behalf," when he said no such thing, andsays "Daukoru sought further to distance Nigeria from [ERHC Energy Chairman Sir Emeka] Offor, once an influential character on the Nigerian political scene, but now a more marginal player," which is patently untrue.
DIndeed, aukoru did no such thing. Instead, he presented options to Sao Tome regarding ERHC that are interesting, on the one hand, and all but impossible to implement, on the other. Both Daukoru and Nigerian President Olusegun Obasanjo remain close to Offor, who is now a leading bidder to acquire the nation's largest petroleum refinery with partners from India and China.
Last February, the publication blamed the troubles in Block 4 on ExxonMobil's reluctance to work with ERHC Energy, implying it was somehow unworthy of a partnership with the global oil giant that has been accused of bribing Equatorial Guinea officials in testimony to the U.S. Senate Commerce Committee headed by its friend, Alaska's U.S. Sen. Ted Stevens. This backhanded slap at ERHC seems planned to present "insiders" with a choice bit of gossip, even if it is false.
Anadarko and ExxonMobil, its desired partner in a bid for Block 4 that ultimately failed, is believed to be behind most of the delays, so the news that it will sign a PSC that includes ERHC Energy and its partner Pioneer Natural Resources, a 25-percent minority joint venture in the block, is likely to encourage wait-weary and waffle-wary ERHC investors.
The newsletter also is making a hard-to-find copy of the R. Dobie Langenkamp JDZ probe report avilable to subscribers on its site.
"Nigeria Focus", after the rough-hewn but reliable Africa Energy, may be the best and most insightful African oil industry newsletter available, and one that will occasionally go out on a limb to publish vital information that other publications cannot verify. The publication carefully culls articles from reliable sources and puts it together with intelligence its own staff has gathered.
While all of the Daukoru quotes in the article - from Reuters and Platts, mainly, have been published here, the newsletter is the first to name a date and make the probe report available for readers, suggesting they have ties to Anadarko. Often, however, their proffered dates are wrong, as they were last Winter.
As was the tradition before the makeover, the December 2005 edition was released this week, a month after the edition date. No one has ever reported seeing the December edition before this, however. Here is the Migeria Focus story:
JDZ delays cause frustration
Nigeria is frustrated over the slow pace of developments in the Joint Development Zone it shares along an undemarcated maritime boundary with São Tomé e Principe, and is angry over what it regards as ill-informed criticism from senior officials in the archipelago, according to well-placed sources close to the process.
The same sources add, however, that Nigeria would abandon its treaty with its island neighbour only as a last resort and with the greatest reluctance.
After months of wrangling, Chevron is set next month to drill its first exploratory well in block 1, the only concession awarded in the 2003 round, while Anadarko, operator in block 3, is understood to be ready to sign a production sharing contract with the Joint Development Authority that manages the JDZ in mid-January.
“The JDA has been informed they are ready to sign on 16 January,” according to one senior official close to the process. “We went into the JDZ partly because of diplomacy and to help in our border dispute with Cameroon. But now we see real potential in the JDZ. Unless São Tomé is no longer interested and makes things impossible, we very much want to move forward.”
Anadarko has 51% of block 3. Its partners are ERHC/Pioneer Energy (US – 25%), DNO/EER
(Norway – 10%), Equinox (Nigeria – 10%), and Ophir/Broadlink (South Africa/Nigeria – 4%).
The signature bonus for the block is $40 million.
In early December, Adelino Pereira, the youthful attorney-general of São Tomé, accused Nigerian political and commercial interests of perverting the course of the 2004 JDZ licensing round. In a report (available to subscribers at www.menas.co.uk) prepared by US investigators from the Tulsa law school, he said the process had been riddled with irregularities that had cost São Tomé almost $60 million. He said São Tomé should again examine its contract with the Nigerian-controlled, US-registered ERHC, which has generous preferential rights in the JDZ. The attorney-general also asked for the US Justice Department and Securities and Exchange Commission to investigate alleged violations of the Foreign Corrupt Practices Act by ERHC.
Edmund Daukoru, Nigeria’s deputy oil minister and chairman of the Joint Ministerial Council, told Reuters ahead of the mid-December OPEC meeting in Kuwait that his first reaction was: “just to reject the report in its entirety. They cannot come after the event to condemn because of their own internal politics.” He said the incessant feuding between rival political factions made São Tomé an exceptionally difficult partner: “I see a basic inability to weave a national consensus even on small issues. We are being made to appear as if we are forcing things on them.”
He rejected criticism that Nigeria had effectively bullied its tiny neighbour: “For anybody in São Tomé to be holier than thou really surprises me. If they were to operate that place alone, they would get worse things than what we got working together. They have benefited from our experience.” Daukoru also issued a threat: “We
have entered a treaty with them which in hindsight, one wonders ... In a case where every issue has to be dealt with in conference with the two countries, I don’t know how long it will work. But having entered into it and until the treaty is revised, we have to show patience.”
Nigerian officials have gone even further in private, describing Pereira’s report as error-strewn, inaccurate, unbalanced, poorly prepared and partial. They believe they have key allies in São Tomé itself, who would help bury the report and allow the licensing process to move forward. The justice minister has accused the attorney-general of abusing his position.
President Fradique de Menezes has chosen publicly to support both the awards as announced in May, flaws in the process notwithstanding, as well as the JDZ treaty with Nigeria. “If we cancel the licensing round, we must also obtain the agreement of the Nigerian side. We cannot cancel alone,” he said. “We have a treaty with Nigeria and everything which can be decided regarding the JDZ must be together. We cannot be alone in São Tomé taking decisions, otherwise we will have a conflict with Nigeria… I consider the treaty has been a very good thing.”
Daukoru’s intervention may complicate the initiative, however, further politicising the attorney-general’s report ahead of elections in 2007. Parliamentary elections are due in São Tomé in March, with presidential elections to follow three months later. Nigerian officials fear ‘standing up to Nigeria’ could become an issue as candidates seek populist issues.
The probe was initiated after factions opposed to Menezes, including his former petroleum adviser and foreign minister, Patrice Trovoada, who heads the opposition ADI party and is son of former president Miguel Trovoada, and elements of the MLSTP, the largest single group in parliament, complained in May of irregularities in the licensing process.
Menezes’s supporters accused such groups of political opportunism, noting that most of São Tomé’s difficulties related to its original 1997 agreement with ERHC – before Menezes came to power, before the establishment of the JDZ and before controversial Nigerian businessmen Emeka Offor took control of the company.
In his comments, Daukoru sought further to distance Nigeria from Offor, once an influential character on the Nigerian political scene, but now a more marginal player. He advised São Tomé that Nigeria had never acted on ERHC’s behalf, and said: “whatever equity belongs to ERHC they can expropriate or buy, whatever”.
The debate appears set to continue in São Tomé, with factions hoping to delay a final decision on PSCs until after the elections, when they hope a strong performance will allow them more influence over the final outcome of the awards process. Despite months of negotiations, PSCs have yet to be signed on any of the five blocks awarded in May, and two US companies – Devon and Noble – have already withdrawn from the process.
Much of the latest angry exchange between Nigeria and São Tomé may amount to little more than political theatre. While opposition to the proposed awards have been strongest in São Tomé, the islands have by far the most to lose from any unravelling of the JDZ treaty – a formal border demarcation might take several years, with an uncertain outcome. In the meantime, São Tomé, already one of Africa’s poorest states, would earn nothing from the oil sector – and would still have its contract with ERHC to resolve.
But despite the progress in blocks 1 and 3, Nigeria Focus understands there remain significant difficulties in block 4, where Addax, originally an oil trader but now Nigeria’s largest independent producer, with around 70,000 b/d, is hoping to replace Noble as ERHC’s partner and operator, despite coming fifth in the original technical and commercial evaluation. Addax in early December announced a $400 million IPO in Canada as part of efforts to raise its profile and capital base.
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