ERHC & BM - Nigeria defiant over its awards Ministry says round followed 'routine practice' but potential future bidders stay wary
By Upstream staff
THE Nigerian Ministry of Petroleum has defended the way it awarded deep-water blocks outside of procedures dictated for last May's mini-round, suggesting "routine oil industry practice" was followed.
Majors bidding for the blocks remain unconvinced, clouding plans to hold another licensing exercise before the end of the year.
The acquisition by Addax Petroleum of Nigerian independent Starcrest's interest in OPL 291 was defended as "in line with the open and transparent bidding for acreage allocation in the 2005 round", according to ministry spokesman Peter Ogbonnaya. The same process will be adopted in future rounds, he said.
Minister of State for Petroleum Edmund Daukoru insisted Starcrest, in partnership with Taiwan's Chinese Petroleum Corporation, qualified to participate in the mini-round, winning OPLs 226 and 294 while Transcorp won OPLs 281 and 295.
India's Oil&Natural Gas Corporation/Mittal Energy tie-up won right of first refusal to OPL 291 but did not submit any bid, leaving the acreage stranded, Daukoru said.
This justified a request by both Transcorp and Starcrest/CPC to swap their own blocks for OPL 291, but Transcorp failed to pay the signature bonus, leaving the way clear for Starcrest/CPC to find $55 million and secure the block.
When CPC withdrew, Starcrest applied to replace its operating partner with Addax. Daukoru's explanation has left industry observers wondering why, if everything was above board, the director of the Department of Petroleum Resources (DPR) Tony Chukwueke was forced out of his job so abruptly two weeks ago.
Neither Transcorp nor Starcrest indicated interest in OPL 291 at the time, nor did they later apply on the floor of the conference to swap their own blocks for the acreage, said a senior executive present during proceedings.
Both companies are alleged to be associated with close business allies of the presidency and to have benefited from secret post-bidding manoeuvres, unwitnessed by other participants.
Faith in the ability of Abuja to conduct fair and open tendering before next April's elections has collapsed, as has morale at the DPR.
Junior assistant director of finance Chioma Njoku has been appointed acting director of the DPR, over the heads of more senior directors such as veteran upstream petrocrats Billy Agha and Olutoye Ibikunle who were deemed to be too close to Chukwueke.
Starcrest is owned by Ibo business magnate Emeka Offor and is under investigation by Abuja's Economic&Financial Crimes Commission.
Starcrest tried its luck with Sinopec after the deal with CPC fell through but the Beijing giant was unhappy with the tight time frame for concluding an agreement on OPL 294.
Addax persuaded Starcrest to instead pursue OPL 291 and in partnership with Starcrest managed to secure terms from the DPR exactly similar to the deal Addax had earlier signed with ERHC Energy in the Joint Development Zone.
At least 43% of ERHC equity is also owned by Offor, who has angled to acquire Starcrest by issuing additional ERHC shares a move that at one fell swoop would land him about 70% of ERHC stock in the most prospective frontier oil province in west Africa. Minnow ERHC enjoys a key position with Addax in JDZ blocks 2, 3 and 4.
Offor also came under fire this week from Colorado-registered ERHC shareholders for appearing to commit a breach of fiduciary duty by diverting a commercial opportunity for his own benefit, preferring to press the interests of Starcrest rather than ERHC in Nigeria's Exclusive Economic Zone.
Burgeoning disquiet among ERHC shareholders may yet result in a class action derivative lawsuit under US federal jurisdiction designed to prompt Offor to revaluate his acquisition strategy in the Gulf of Guinea.
A spotlight thrown on the world of Nigerian licence allocations at this juncture could dissolve all confidence in the country's upstream policy until a new administration takes charge next May.
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01 December 2006 00:01 GMT | last updated: 01 December 2006 00:01 GMT
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