Nigeria/Sao Tome oil licenses may hold surprises
Tue Apr 20, 2004 07:50 AM ET
ABUJA, April 20 (Reuters) - The list of winners for a landmark oil exploration licensing in Nigeria and Sao Tome's joint development zone may hold some surprises, authorities said on Tuesday. The two countries began the licensing process for nine offshore blocks in the Gulf of Guinea last October, marking Sao Tome and Principe's first steps into the world of big oil.
While the list of signature bonuses from October's bidding round has already been published, other elements of the bids such as technical and financial capability, production bonuses and community projects could still change the shape of the list of winners, organisers said. One of the nine blocks attracted a $123 million signature bonus from ChevronTexaco (CVX.N: Quote, Profile, Research) , which Tajudeen Umar, chairman of the joint development authority, said set a new global record in terms of dollars per square km. But the signature bonus alone does not guarantee the company's success. "Chevron had the highest signature bonus, but it was not the highest commercial offer," Umar told reporters at an industry conference in the Nigerian capital. The authority is set to announce the final winners within two weeks, he added.
The Gulf of Guinea, shared by Nigeria, Cameroon, Equatorial Guinea, Gabon and Sao Tome, has seen a swathe of huge oil discoveries in deep ocean depths over the past decade. The United States sees the area as a strategic supplement to its oil supplies from the war-torn Middle East. Umar said there would probably be multiple partners on the nine blocks as the authority "normalised" the bids prior to announcing a winner.
Each bid comprised signature bonuses to be paid up front, production bonuses to be paid after a certain volume of oil has been produced, and community projects planned in Nigeria and Sao Tome.
There are also technical criteria such as experience in deepwater exploration and production, local content and financial capability to be considered in the final decision by the two governments. "Very probably there will be multiple partners on all the blocks because very often the best commercial offer was not the best technical offer and vice versa," he said. U.S oil giant ExxonMobil (XOM.N: Quote, Profile, Research) and little-known ERHC have both exercised pre-emptive rights to minority stakes in seven of the nine blocks, which the companies earned by doing preliminary exploration work for Sao Tome prior to the establishment of the joint authority in 2000.
Revenue from any oil produced from the area will be split 60/40 in favour of Nigeria, according to terms of the bilateral accord.
In October's bidding round, the highest bid was $123 million offered by ChevronTexaco for block one, the second highest was for block two, where Nigerian dredging company Foby Engineering bid $113 million. Foby was also top bidder for block nine.
Sahara Energy was the top bidder for blocks three and five, ECL International lead the pack for block four, Maurel et Prom was top bidder for block six, and Fusion (FOG.L: Quote, Profile, Research) was sole bidder for block seven. Block eight attracted no interest.
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