ERHC Energy Inc (ERHE)

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President removes official after allegations of corrupt dealings
Sao Tome's minister for energy axed

By Barry Morgan
Photo by REUTERS/SCANPIX

President Fradique de Menezes of Sao Tome & Principe last week sacked the country's Minister for Natural Resources&Energy Aghostinho Rita, replacing him with businessman Carlos Fernandes Marques.

Insiders said the transition will not mark a departure in the archipelago's energy policies.

Rita's sudden removal was demanded by Prime Minister Rafael Branco following allegations that the minister ordered a state utility to advance scholarship funds to an educational institution that he owned.

Marques will initially be tasked with completing adjustments to the framework petroleum law to allow direct negotiation of oil blocks before a planned bidding exercise for vacant acreage in the deeper waters of the Exclusive Economic Zone.

Little exploration activity has been committed in the waters surrounding the archipelago or the Joint Development Zone it shares with neighbouring Nigeria in recent years.

Interest in the play waned following Chevron's non-commercial Obo-1 wildcat drilled on Block 1 in May 2006.

Reported disagreements between the Joint Development Administration, Iran's ICC/OEOC and Nigeria's Filthim-Huzod over signature bonus payments for blocks 5 and 6 remain unresolved.

Recent media reports from Nigeria questioned ERHC Energy's 15% stake in blocks 5 and 6, but chief operating officer and acting chief executive Peter Ntephe has written to the Joint Ministerial Council indicating that he would defend his company's rights in court.

Insiders said the latest spat was little more than sabre-rattling and that ERHC's legal claims to acreage positions in the JDZ and in Sao Tome EEZ were set out in treaties.

Meanwhile, the International Monetary Fund (IMF) last month noted that the protracted talks were holding up payments of about $26.1 million for the two blocks.

The IMF's baseline scenario for Sao Tome also assumes first oil can be produced "from one well" in the JDZ as early in 2014.

"The debt outlook remains vulnerable even under the baseline scenario (and) the risk of debt distress increases significantly under any scenario with no oil production," warned the IMF report.

The IMF also said that if only one of the six JDZ blocks finds commercial oil this would "still have a sizeable effect" on Sao Tome's economic prospects, but that in the absence of oil the country would become acutely vulnerable to rising external debt.

In a hopeful sign, operator Addax Petroleum along with Sinopec and ERHC Energy last month confirmed their intent to deploy the drillship Aban Abraham, most likely in Block 2, the first of five well slots on this acreage, and on Block 4.

http://www.upstreamonline.com/hardcopy/news/article165318.ece