midtieroil, Some history of Nigeria and SEO FYI
When President Olusegun Obasanjo persuaded the government of Sao Tome and Principe to settle a protracted dispute with ERHC, a little known US oil company, the Saotomean government was oblivious of the fact that ERHC was a front for highly placed Nigerian government officials including the President Obasanjo himself and of the lingering trouble that would unfold thereafter.
In May 2001, as part of an agreement mediated by the Nigerian government, Sao Tome settled it conflict with ERHC that had just been taken over by the Houston-based Nigerian company Chrome Energy Corporation headed by self styled, Sir Ekeka Offor. The new owner, who had taken a 56% stake in ERHC, and on the advice of President Olusegun Obasanjo, withdrew the request for arbitration at the International Chamber of Commerce, Paris, lodged by the company’s previous owners in late 1999.
ERHC contract dispute was brought to the attention of President Olusegun Obasanjo during negotiations with the government of Sao Tome and Principe on the disputed maritime boundary between both countries. President Trovoada of Sao Tome was at the leader of the negotiating team on the Sao Tome side.
Emeka Offor and Chrome reportedly had to pay millions of dollars to creditors to avoid ERHC’s bankruptcy. Consequently, ERHC/Chrome made a mysterious payment of $550,000 to Procura Financial Consultants and one STP Energy Corporation, registered in the British Virgin Islands. Chrome Energy is part of the Chrome Group, a private holding company owned by Sir Emeka Offor. Offor was a well-known ally of the late Nigerian dictator Sani Abacha.
Sao Tome and Principe, a country of slightly over 130,000 inhabitants had very little to no experience in the area of oil exploration and politics. But STP was aware of the importance of reaching maritime border agreements with its neighbors in the Gulf of Guinea. After having filed its maritime boundary claims with the United Nation’s Law of the Sea Commission in New York, the respective maps were sent to the neighboring countries.
Negotiations with Equatorial Guinea commenced in October 1998. Nine months later the Presidents Trovoada and Teodoro Obiang Nguema signed an agreement on the delimitation on their countries’ maritime borders. Five of STP’s 22 deepwater blocks surveyed by Geco/Prokla were located alongside Equatorial Guinea’s territorial waters. A similar agreement with Gabon on the delimitation of the common maritime borders, based on the principle of equidistance between the two countries, was reached in April 2001.
Almost two years earlier in August 1999, a STP government delegation protested in Abuja against the Nigerian government’s decision the previous month to sell deep-sea oil blocks situated in an area claimed by Sao Tome and Principe, STP, as part of its own Exclusive Explorative Zone, EEZ. This development prompted the both countries to commence formal maritime boundary talks four months later. In April 2000 the negotiations ended without an agreement on the maritime boundaries between the two countries.
The main obstacle to reaching an agreement was Nigeria’s refusal to accept Sao Tome’s proposal that based the boundary on equidistance between the continent and the islands. However, faced with the possibility of a prolonged legal conflict with Nigeria, the Santomeans sought a viable compromise settlement.
It was this desire by the government of Sao Tome and Principe to avoid a lengthy legal process to could end up costing the country a lot of money that the government decided to reach an amicable settlement with Nigeria on terms deemed by third parties as completely detrimental to Sao Tome and Principe and very favorable to Nigeria.
Also, it was during this period that Nigeria’s President Obasanjo introduced Sir Emeka Offor to the President of Sao Tome as “The man who will help the country settle its dispute with ERHC.” Obasanjo new that the ERHC was in financial trouble and, was facing possible bankruptcy, based on information provided by the government of Sao Tome and Principe. Emeka Offor was asked to approach officials at ERHC through his oil concern, Chrome, which was already doing very lucrative contracts in the downstream section of the Nigerian Oil industry. Offor won the lucrative contract Turn Around Maintenance, TAM, contract to service Nigeria’s refineries which were almost in unserviceable state when President Obasanjo took over power from Abdulsalami Abubakar in 1999.
Under the agreement, Nigeria received 60% of the profit of the common zone and STP 40%, and they shared the costs of operation in the same proportions. Following several other negotiation rounds, Foreign Ministers Rafael Branco of STP and Dubem Onyia of Nigeria finally signed a 45-year treaty on 21 February 2001 that created a 28,000 sq. km large Joint Development Zone (JDZ) that was to be managed by a Joint Development Authority (JDA) based in Abuja. The Authority’s board consists of four executive directors, two from each country, to be appointed by the respective head of state for a renewable period of six years.
The JDA reports to a Joint Ministerial Council (JMC) comprised of four ministers from each country. The JMC has the overall responsibility for all matters concerning the JDZ. In January 2002 Presidents Obasanjo Nigeria and Menezes of STP inaugurated the JDA office in Abuja. Flávio Pires Dos Santos, former chairman of STP’s National Oil Commission became executive director of the JDA’s Non-Hydrocarbon Resources Department, while Luís Alberto Prazeres, the country’s first minister of National Resources (1999-2001) was appointed executive director of the Commercial and Investment Department.
The Nigerian Taju Umar became executive director of the Monitoring and Inspections Department and Chairman of the JDA, and Carlos Gomes, the former head of STPetro, became deputy director of Monitoring and Inspections. Nigeria advanced $8 million for the first year of operations. Only in February 2004, however, did the JDA officially open a local branch office in São Tomé.
Although lawyers advised against a settlement, because they thought that STP could win the arbitration, President Obasanjo persuaded the government of Sao Tome and Principe to settle the case privately by withdrawing the arbitration The Santomean negotiation team included Foreign Minister Rafael Branco and Trovoada’s son Patrice, the president’s economic advisor who was rumored to have many personal contacts in Nigeria. In addition, Chrome had boasted that its president, Sir Emeka Offor would ask President Obasanjo not to ratify the treaty on the JDZ, and would resort to international law to confiscate STP’s assets abroad and impede oil exploration in STP for many years. STP subsequently abandoned arbitration and the government allowed ERHC/Chrome far-reaching financial advantages within the JDZ, including a 15% working interest in two blocks of ERHC/Chrome’s choice, a 5% share in signature bonuses and a 10% share of profit oil, and a 1.5% over-riding royalty interest in production.
In addition, ERHC/Chrome received two blocks of its choice in the EEZ without paying a signature bonus, and the option to acquire a 15% working interest in another two blocks of its choice. ERHC/Chrome assigned its 49% stake in STPetro to STP and, consequently, relinquished its rights to acquire, as STPetro, four blocks within the EEZ. This new 25-year agreement with ERHC/Chrome replaced the one signed in 1997 and was contingent on the ratification of the treaty on the JDZ by the National Assembly in São Tomé. The Nigerian Foreign Minister Dubem Onyia witnessed the signing of the agreement in May 2001.
Emeka Offor’s threat to block the country from signing a treaty with Nigeria thereby scuttling the country’s ability to start oil exploration was not an empty threat. Indeed, in a meeting the president of Sao Tome in 2001, Chief Dubem Oyia, Nigeria’s then foreign minister, made it very clear during negotiations that Nigeria signing a treaty with Sao Tome was “Contingent on an amicable settlement” with Emeka Offor’s ERHC/Chrome. “Your officials made it very clear that they will not sign a deal with us without Chrome. President Obasanjo came here several times in the company of Offor.” A highly placed government functionary who was part of the negotiating team from Sao Tome told The Times Of Nigeria.
President Menezes of Sao Tome having been told blankly that he has no choice but to deal with Emeka Offor and his Chrome Oil, resigned himself and his tiny country to fate. However, things took a different trend when the United States began to show interest in the treaty signed by Nigeria and Sao Tome. Under the prompting of the United States, the government of the President Menezes contacted a United States law firm and asked it to help investigate the contract.
In May 2002, While President Menezes was in the United States to participate in the UN Children’s Summit, he received a copy of the American lawyers’ analysis of the oil agreements. Back in Sao Tome, on the 24th of May, during a press conference, Menezes publicly demanded the renegotiation of all oil agreements signed by various governments with ERHC/Chrome, Exxon Mobil, Nigeria, and PGS. Based on the lawyers’ analysis, the head of state argued that the agreements contained grave errors and their terms were extremely unfavorable to his country. He also blamed the STP advisors and lawyers who had participated in the negotiations for the prejudicial terms of the contracts.
Menezes attributed the anomalies detected by American the lawyers to a lack of experience of the country’s negotiators. This critique was also directed at former president Miguel Trovoada and his son Patrice, Rafael Branco and Posser da Costa, who had negotiated or signed the contracts, though at the time Menezes had been a deputy for the ADI in parliament and did not raise any doubts about the treaties. Menezes had also reacted in response to demands by the IMF, who in February 2002 had urged the government of Sao Tome to take action following the results of the analysis of the agreement signed with EHRC/Chrome.
The Nigerian government was baffled at the turn of events and threatened that it will make difficult for Sao Tome to start oil exploration should the Island country renege on its agreements with Nigeria and Chrome. With the support of the United States government solidly behind him, President Menezes called Nigeria’s bluff and demanded that the contracts be renegotiated. President Obasanjo was said to have been incensed.
As a way to sweeten the deal and pacify President Menezes, President Obasanjo had made some concessions to Sao Tome. Nigeria had promised to supply 60,000 barrels of oil daily to Sao Tome. Nigeria also promised scholarships to citizens of Sao Tome to study in the United States and the United Kingdom. This concession was added as a memorandum to the JDZ treaty between both countries. The official reason given for the amendment t was the need to compensate Sao Tome for Nigeria’s sole exploration of block 246 which Sao Tome insisted is part of the JDZ but, Nigeria wants sole rights of this block because of the large amount of deposits on it. TheTimesOfNigeria.com has it on good authority that these concession was done to placate the Sao Tomean government on Nigeria’s insistence on Chrome and Emeka Offor as major players in the JDZ.
When the promised 60,000 barrels of daily oil supply and scholarships failed to materialize in good time, President Menezes sent a Santomean delegation to Abuja headed by Rafael Branco, the minister of natural resources for talks with Abuja. On his return from Nigeria, Branco told President Menezes that that before defining the quantity of crude, the modalities of supply had to be discussed. With regard to the promised scholarships, he declared that in September the first students could leave for Nigerian and other universities abroad. This was the commitment he was able to pry way from Abuja.
However, President Menezes refused to by pacified by the concessions. Again, he publicly demanded that the contracts and treaty be renegotiated with particular reference to Chrome’s sweet deal. President Obasanjo was enraged. He summoned his inner caucus and officials at the Nigerian National Petroleum Commission and instructed them to look into ways out of the quagmire.
In June 3, 2002, President Obasanjo flew to Sao Tome along with his trusted officials for a three-hour discussion aimed at reconciling the parties. Sir Emeka Offor of Chrome was present at the meeting. President Menezes’ protocol officials were reportedly angry when Offor arrived with Obasanjo because the meeting supposed to be a private one between the two presidents. After some bickering, Emeka Offor was allowed into the meeting. A highly placed government official who was present at the meeting told The Times Of Nigeria that President Menezes restated his country’s position on the need to renegotiate all the oil contracts and the treaty between both countries.
Again, President Obasanjo sought to make additional concessions to Sao Tome. He promised the advance payment of $5 million for signature bonuses, at the time estimated at $120 million and to help solve the question concerning the daily supply of 60,000 barrels. In July, Nigeria paid the sum $5 million to Sao Tome, however, the question of crude supplies remained unsolved. Again, President Obasanjo’s promise went unfulfilled.
In September of that year, at the UN Summit on Sustainable Development held in Johannesburg, President Obasanjo again promised President Menezes 10,000 barrels of crude per day in compensation for Block 246, only 1/6 of the quantity initially promised. The following month, the Nigerian ambassador to São Tomé, Saidu Pindar, confirmed to Menezes that the supply would be 10,000 barrels per day. The diplomat asserted that this quantity had been fixed in a Memorandum of Understanding signed by both countries on September 25, 2002. Yet two weeks later Minister Branco complained that Nigeria had not fulfilled any provision of the memorandum, although the first oil supplies had been promised for mid-January 2002 when the JDA office was inaugurated.
In early November Menezes assured Obasanjo in a letter that, despite certain misinformation, his country was fully committed to the implementation of the JDZ treaty in every detail. Then he asked if Nigeria was equally committed to the implementation of the treaty including the promises of the memorandum that he described as an integral part of the agreement.
Unknown to President Obasanjo and the Nigerian officials involved in the negotiation is the fact that President Menezes has made up his mind not to go on with the contracts. To help scuttle the contract, he had invited two high-profile American lawyers Greg Craig and Michael O’Connor of the Washington, D.C. based firm William & Connolly visited São Tomé for two weeks at the invitation of President Menezes, to check all oil agreements. While on the island they met regularly with Menezes to discuss their assessment.
The two lawyers came to the same conclusion as their colleagues: the agreements were detrimental to the country’s national interests. Former US congressman Joseph P.Kennedy, the head of Citizens Energy Corporation, had got Craig, who had been President Clinton’s lawyer during the Monica Lewinsky affair, in touch with Menezes.18 At the same time, in an attempt to polish up their image, ERHC/Chrome hired former Chevron Texaco vice-president Richard Matzke as a special advisor.
In September 2002, President Menezes met with President Bush and then attended the annually UN General Assembly in New York. Officials’ privy to the outcome of the meeting told TheTimesOfNigeria.com that President Bush promised to support Sao Tome in the event of any dispute with Nigeria over the disputed oil contracts. He even promised to establish a military base in the Island country. When Nigeria learned of the intention of the United States government to establish a military base in Sao Tome, when President Bush inadvertently mentioned it in an unwritten speech, President Obasanjo saw it a slide on Nigeria and protested to the United States. The military base has been on hold since then. The initial plan was to have the troops and equipment on the ground announcing it to the public.
While in New York, and encouraged by the conclusions of the American lawyers, President Menezes wrote to ERHC/Chrome owned by Emeka Offor that his country would not go ahead with the agreement of May 2001 since it was ‘so terribly one-sided as to be unconscionable and unenforceable’. Nevertheless, Menezes indicated that he was open to renegotiation of the agreement. Four days later the company replied by disputing Menezes’ statement and claimed that as head of state he had no legal authority to cancel any contract since he was non-executive under his country’s semi-presidential Constitution.
ERHC/Chrome stressed that its rights in the JDZ could only be discussed by the JDA and vowed to vigorously defend its rights in the agreement in all international jurisdictions. The following month, ERHC/Chrome filed brief in Washington requesting a US commitment to support the company in any such dispute. At the same time, ERHC/Chrome president Chude Mba arranged to meet President Menezes to discuss a possible compromise. Meanwhile, Menezes threatened that his country would resort to the International courts if the renegotiations with the Nigerian should fail.
In November of 2002, exactly one week after Menezes’s letter to Obasanjo demanding the promised compensations for Block 246, the Nigerian government decided to suspend the long scheduled licensing round for the first nine blocks in the JDZ until Sao Tome clarified the contentious issues with third parties. The third party of interest to Nigeria was mainly Emeka Offor and his Chrome. Nigeria insisted that only after a resolution of these problems would the licensing round go ahead.
Finally, in March of 2003, Emeka Offor’s ERHC/Chrome relinquished its earlier rights to an over-riding royalty interest, a share of signature bonuses and a share of profit in the JDZ. Under the new agreement, ERHC/Chrome increased its rights to participate in the JDZ from a total of a 30% working interest in two blocks to a total of 125% working interest spread over six blocks, ranging from 15% to 30% each. In addition, Chrome was freed from paying signature bonuses on four of the blocks. Although the previous agreement remained essentially intact, the government saw no alternative, since the Nigerian government had threatened to paralyze the licensing round if the agreement with Emeka Offor’s ERHC/Chrome was not respected.
The Chrome justified the excessively favorable terms on the grounds of the $12 million it had invested in the development of STP’s oil sector. STP’s chief negotiator was Rafael Branco, then minister of natural resources, who had been involved in the previous deal with the Nigerians. STP’s National Oil Commission (CNP) had an advisory role in the negotiations. One of the CNP’s members was the Foreign Minister Mateus Meira Rita, a former ERHC consultant who owned 500,000 company shares.
He had received the shares instead of his salary when ERHC had run out of cash. Two other commissions’ members had also been on ERHC’s payroll at STPetro. On April 10, 2003, the new Agreement was officially signed. Analysts also considered the new deal excessively generous to ERHC/Chrome and out of line with international oil industry practices.Potential investors criticized the deal since it compelled them to co-operate with a partner with a limited record of accomplishment in the oil industry.
www.thetimesofnigeria.com/index.php?option=com_content&task=view&id=340
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