Another article re: EO and Starcrest:
N12bn Oil Deal Causes Ripples in Aso Rock
By Lucky Fiakpa and Crusoe Osagie, 11.17.2006
The multi-billion naira oil romance between Addax Petroleum and relatively unknown Starcrest Energy Limited over the controversial award of Oil Prospecting License (OPL) 291 to the latter, which almost immediately farmed it out to the former may soon start to count its casualties. Unconfirmed sources at the Department of Petroleum Resources (DPR) told THISDAY yesterday that the embattled Director of the Department, Tony Chukwueke, may have been moved to the Ministry of Petroleum Resources while a female assistant director elevated to take over in an acting capacity.
The Nigerian government had granted a lucrative oil bloc to Starcrest, a hitherto unknown company behind close doors and in flagrant breach of the Extractive Industry Transparency Initiative (EITI) to which Nigeria subscribed in 2003 and the government’s own policy of transparency. Starcrest in turn sold 72.5 percent of its equity in the oil bloc to Addax Petroleum for a princely sum of $35m (about N5billion).
Addax, a Swiss based Canadian Oil Exploration Company recently announced that it has entered into a $90m (about N12billion) oil deal with Starcrest Nigeria Energy to explore oil in Nigeria’s oil rich Niger Delta region.
Announcing the deal, President and Chief Executive of Addax said “the addition of OPL 291 to our deepwater exploration portfolio is truly exciting. The highly prospective nature of the bloc is underlined by its proximity to the nearly world-class Agbami Oli Field, which is under development. We believe that OPL 291 offers significant potential to our company and its shareholders.”
The allocation of the highly prospective bloc to Starcrest Energy is raising eyebrows because the company is not known in the industry. Indeed, it is suspected that the company was hurriedly put together to take possession of the oil rich field covering 1,287 square kilometers.
The oil field did not receive any offer in the May 2006 oil bidding round. Starcrest Energy is believed to have been hurriedly registered to take advantage of the procedure is for oil blocs that receive no offers in open auction to be reserved for future bidding. In the present instance, the lucrative oil bloc was offered to Starcrest Energy immediately after the registration of the company and behind close doors.
A company search at the Corporate Affairs Commission (CAC), Abuja, revealed that the directors of Starcrest Nigeria Energy are Sir Emeka Ofor, Shorebeach Nig. Ltd represented by Ikechukwu Okpala and Starcrest Energy Ltd, represented by Tochukwu Odukwe. The company was registered on May 19th, 2006 and has its head office on No. 22 Lobito Crescent, Wuse II, Abuja.
It has equity of 1,000,000,000 shares. Emeka Offor holds 50 per cent while the other two directors hold 25 per cent each.
Explaining the details of the controversial award of the oil bloc to Starcrest yesterday, an industry source said as soon as the deal was made public by the press, President Olusegun Obasanjo put together a panel of enquiry to look into it and issued a verbal suspension of the DPR Director.
He said the panel of enquiry, which was constituted on Monday November 13, sent jitters through the entire oil and gas industry and top executives of the Nigerian National Petroleum Corporation NNPC, DPR and the Ministry of Petroleum as they were not sure of the scope of the panel's mandate.
"By Monday night the President decided that a panel of enquiry should be set up and that Chukwueke should be suspended while the panel carries out its mandate.
"It is expected that before the end of today the result of the panel will be released and the true position will be known. But at the moment the situation is still very fluid," he added.
The deal blew open when Addax Petroleum announced last month that it had agreed to pay $90 million to take control of Oil Prospecting License (OPL) 291, an oil bloc that was not put on offer in the open auction of May.
In line with the expectations of the production sharing contract, PSC, Addax Petroleum and Starcrest paid the mandatory signature bonus of $55 million to NNPC and was to undertake an initial investment of $75 million covering an initial work commitment which comprises the acquisition of 3D seismic and drilling one well. They were also expected to sign a Memorandum of Understanding with NNPC to undertake an investment in an Independent Power Project (IPP) which would be developed with gas from a commercial development in OPL291 and agreement with NNPC on the technical and commercial arrangements should the IPP proceed.
In line with the farm-out agreement, Addax Petroleum was expected to pay to the Nigerian government, 100 per cent of the OPL291 PSC signature bonus of $55 million; to pay to Starcrest, a farm-in fee of US$35 million; and to pay Starcrest's share of OPL291 exploration and development costs which will be reimbursed to Addax Petroleum from Starcrest's share of production revenues from OPL291.
OPL291 is located approximately 130 kilometres off the Nigerian coast, where the water depth ranges from approximately 1,000 to 2,300 meters and covers a gross area of 1,287 square kilometers (318,000 acres).
OPL291 is immediately adjacent to OML127 (to the east), which contains the Agbami and Ikija fields, operated by Chevron and OPL242 (to the west) operated by Devon Energy.
