JDZ awards edge towards controversial compromise
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NIGERIA FOCUS
APRIL 2005 VOL 6 NO 4
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JDZ awards edge towards controversial compromise
Intense negotiations have been taking place in a bid to reach consensus between Nigeria and São Tomé e Principe over the award of five blocks in the Joint Development Zone along their common maritime boundary.
The Joint Ministerial Council, made up of senior officials from the two countries, began meeting to approve the awards on 26 April. The meeting broke up two days later without any formal announcement, amid indications of a complex and potentially controversial compromise.
Some São Tomé officials are understood vigorously to have opposed the proposed allocation of up to 20% in awarded blocks to several indigenous Nigerian companies which either have no experience in oil and gas or were registered at the last moment to participate in the round. These include Momo and Equinox, both believed to be controlled by the same Abuja-based businessman, and Godsonic and Hatman, both linked to a controversial confidant of President Olusegun Obasanjo, ruling People’s Democratic Party heavyweight and former works and housing minister Tony Anenih.
Nigeria is understood to have opposed counter-proposals to award operating rights in block 4 to Anadarko over Noble, its preferred choice. Nigeria was also lukewarm over pressure to increase significantly the stake offered to Indian firm ONGC and its partner Equator. Equator’s chief executive Wade Cherwayko, is associated by some officials in Nigeria with one of his previous companies, Abacan, which collapsed spectacularly and at some cost to its local partner in 1997, after banks lost confidence in much repeated promises of huge returns from investment in the Niger Delta.
It is understood Nigeria and São Tomé reached a compromise on 28 April after three days of talks in Abuja in a deal that allows for the award of all five blocks but includes the participation of new players. The proposed deal requires the approval of the National Petroleum Commission in São Tomé, before formally being signed off by a reconvened meeting of the JMC.
Officials hope to conclude the round and announce awards in time for a visit to Nigeria on 4 May by São Tomé’s President Fradique de Menezes.
Provisionally, it appears operating rights may be awarded as follows:
- block 2: Devon, Pioneer and US-listed, Nigerian-controlled ERHC;
- block 3: Anadarko;
- block 4: Noble, ERHC and an as yet undisclosed party;
- block 5: Iran’s ICC/OEOC;
- block 6: Filtim Huzod, a Nigerian independent with no previous experience in the sector, which has partnered with China’s Sinopec.
Some São Tomé officials are understood to maintain profound reservations about the proposed deal. They have threatened to disclose details of the ownership of some of the indigenous companies with more limited capacity. They have also hinted at disclosure over the methods employed to lobby members of the National Oil Commission in São Tomé, which they say would provoke a profound political crisis in the country.
However, there are counter-allegations that elements of this constituency are also vulnerable to charges of potential conflict of interest, which could prove equally damaging politically, a year ahead of presidential elections in São Tomé. Officials close to the process appear confident that the prospect of any damaging disclosures provoking an equally damaging response is likely to facilitate an uncontentious move towards awards in early May, although the process remains delicate and vulnerable.
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