<h2>OIL!</h2> Chevron Hits Paydirt In Well That Straddles Block 2, UpstreamOnline's Barry Morgan Says; ERHC-Chevron Talks Underway: ERHE Up 19% Today

The headline says it all, folks - and here's the story just released:

Chevron success in JDZ
By Barry Morgan

Strong indications emerged that US supermajor Chevron encountered a substantial oil-bearing structure during its current probe in the Joint Development Zone managed by Nigeria and Sao Tome and Principe.

Chevron has a 51% stake in JDZ block-1, ExxonMobil 40% and indigenous Dangote-EER/Afren tie-up 9%.

As Transocean drillship Deepwater Discovery prepared this week to punch wildcat Obo-1 down to TD in JDZ block-1, reports began trickling out of a far bigger-than-expected target in the upper horizons.

There is speculation that the structure straddles adjoining block-2.

Chevron has renewed interest in block-2 where Chinese giant Sinopec is hoping to clinch operatorship in partnership with Houston-based preferential rights holder ERHC Energy. Senior executives from Chevron and ERHC met Thursday night in Nigeria, primarily to deliberate on the way forward.

Neither Chevron nor Sinopec bid in the second licensing round under which blocks 2 through 6 were provisionally allocated, but both are now understood to be eyeing ERHC equity in the wake of rising oil prices and the lure of fresh reserves.

Sinopec only has a memorandum of understanding with partner ERHC on block-2, which the Joint Ministerial Council, the bilateral body overseeing the JDZ Authority - has yet to approve.

The equity markets remain ever-watchful of nascent moves by upstream players to acquire the minnow outright since that could spark a bidding war before the long-awaited production sharing contracts (PSCs) are due for signature.

ERHC chief executive Walter Brandhuber this week confirmed that both PSCs and attendant joint operating agreements were on course for signature by end-February.

17 February 2006 17:34 GMT | last updated: 17 February 2006 17:34 GMT