Energy Intelligence Says Blocks 2, 3 And 4 Ready To Sign PSCs

The Energy Intelligence newsletter seems to have cleaned up its act a little, this time providing a substantial if costly read and more-or-less accurate information on the negotiations behind the scenes in preparation for the signing of Production Sharing Contracts in Sao Tome on Feb. 28 for blocks awarded in the oil-rich Gulf of Guinea Nigeria-Sao Tome and Principe Joint Development Zone.

Shares of ERHC Energy once again opened higher, hitting $0.685 at 11:11am on volume of 3,627,594 shares, a 13.22 percent improvement over the previous day.

The publication did not acknowledge formal rejection of the error-ridden Sao Tome probe report, however, indicating its bias against ERHC Energy (OTC BB symbol: ERHE) is largely intact. It is also not up-to-date on the significant rumors of Chevron's interest in Block 2 on strong volume of 2,742,949 - more than yesterday's entire trading.

The newsletter says that a Sao Tome official told them Blocks 2, 3 and 4 are ready to sign - in contradiction of most of what we have heard regarding Block 2 - and that at least one further meeting will be needed to finish Blocks 5 and 6. Block 5 was one by an Iranian firm tied to former Iranian President Akbar Hashemi Rasfanjani with India's Oil & Natural Gas Corp., and Block 6 by Filtzim Huzod. ERHC has 15 percent equity in both of those blocks.

Here is the latest from Energy Intelligence:

Nigeria, Sao Tome Inch Forward With Deals

Friday, February 17, 2006

Officials from Nigeria and Sao Tome and Principe hope to finalize production sharing contracts (PSCs) in the first week of March for at least two of five blocks awarded under the second licensing round in the two countries' Joint Development Zone (JDZ).

A Sao Tomean official told International Oil Daily Thursday that a meeting of the Joint Ministerial Council (JMC) is set for Feb. 28 in Abuja and that the body hopes to finalize PSCs for Blocks 2 and 3, and possibly Block 4, during the first week in March.

Blocks 5 and 6 are expected to take some time longer to finalize.

"We are concentrating on Blocks 2, 3 and 4, but will have to resume negotiations for Blocks 5 and 6," the official said.

At the same time, all eyes are on the Chevron-operated Block 1 in the JDZ -- the only block awarded in the first licensing round -- where results from a first exploration well are awaited.

Operator Chevron and its partners, Exxon Mobil (40%), Dangote-EER and Afren started drilling in mid-January. The well is now at a depth of around 12,500 feet, but won't be finished until early March. "Drilling is very encouraging, the prospects are good," a Nigerian official said. "We are waiting for a couple more weeks until the samples have been analyzed."

A Chevron spokesman confirmed that the well was looking "interesting," but declined to make further comment.

Winners of the controversial second round awards were announced in May 2005. But the process has been marred by allegations of corruption and political tussles that have delayed progress toward firm agreements. Since the awards, three US independents -- Pioneer Natural Resources, Devon Energy and Noble Energy -- have walked away from negotiations (IOD Feb.8,p8).

Pioneer announced early in February that it had withdrawn from its 65% operatorship of the coveted Block 2 and 25% participation in Block 3, as part of a consortium with Devon Energy and US-listed ERHC Energy. Noble pulled out of a joint 60% stake with ERHC on Block 4 last November, after Devon quit in July.

Earlier this week, ERHC Chief Executive Walter Brandhuber announced the formal approval of Swiss trader Addax Petroleum as operator of Block 4. The JDA has also approved Addax to replace Pioneer in Block 3, he said in a statement. Anadarko will remain as Block 3 operator. ERHC is negotiating a deal with Sinopec that would give the Chinese state oil firm an operating interest in Block 2 (IOD Feb.9,p8).

Nigerian-owned ERHC has varying stakes in all five of the second-round blocks through a controversial agreement with Sao Tome, as well as equity gained through joint bids with partners.

An Iranian-Nigerian consortium of International Commerce and Communications and Oil Exploration Consortium was named operator of Block 5, with a 75% stake. The consortium is linked to Iran's former two-time president, Akbar Hashemi Rafsanjani, and was the sole bidder for Block 5. ERHC has a 15% interest in the block, and trader Sahara Energy 10%.

Nigeria's Filtim Huzod is 85% operator of Block 6, while ERHC has the remaining 15%.