ERHC Energy Inc (ERHE)

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American firm, Devon withdraws from JDZ oil bloc deal
By Yakubu Lawal, Asst. Energy Editor
U.S. oil firm Devon Energy has rejected offers to operate two oil blocs in the Joint Development Zone (JDZ) of the Gulf of Guinea.

Devon, regarded as one of the largest independent U.S. oil company, was part of a consortium of three firms awarded 65 per cent Operatorship of Block 02 and a 25 per cent stake in Block 03 of the JDZ, a maritime zone jointly operated by Nigeria and the Republic of Sao Tome and Principe.

The revenue accruing from the zone will be shared 60:40 per cent in favour of Nigeria and Sao Tome and Principe respectively.

The other partners are Environmental Remediation Holding Company (ERHC), in which Nigeria's indigenous oil company Chrome Energy holds a majority stake and another US-based company Pioneer.

The consortium had appointed Devon as the operator for Block 02. But in the letter of withdrawal sent last week to the Joint Development Authority (JDA), the body administering hydrocarbon resources in the JDZ, Devon stated that the level of interest it was awarded in the block was not sufficient "to warrant going through with the bid."

The three partners were to share equities awarded to the consortium in the two oil blocks, amongst themselves. Although officials declined to reveal how the equities were distributed, Devon was said to have rejected its share on grounds that it did not meet its expectations.

This leaves the other two partners, ERHC and Pioneer to manage as well as provide fund to pay the signature bonuses for the two blocks. The two parties have already agreed to nominate Pioneer as the new operator for Block 02.

"It is a loss for the consortium, as we had an excellent working relationship with Devon," he said.

"However, in Pioneer, ERHC still has a technically and financially qualified partner to work with."

The memorandum pointed to the June announcement by the Joint Development Authority, which operates the JDZ, in which the authority said it expected the negotiations for the JDZ blocks to be finished within three months, as the likely timeframe.

Speaking on the development, the Executive Chairman of the JDA, Dr. Carlos Gomes, said: "We negotiate and signed agreement with Chevron, Exxon-Mobil, Dangote EER for Block 1 and Chevron has 51 per cent and Exxon-Mobil 40 per cent. In this particular case, the consortium was given 65 per cent and we believe that 65 per cent in 2 is a stake big enough for a consortium to hold but again that very much depend on the policy of the consortium. And we respect the desire of the consortium."

He explained further that the authority does not know how the consortium was bound together, the equity structure, we don't know, we only know there is a consortium led by Devon.

"However, those three applied together, there might be a memorandum between them and they share it inside is there internal problem. We look at them as one block," Gomes stated.

He pointed out that the JDZ does not know how the consortium was bound together, the equity structure, we don't know, we only know there is a consortium led by Devon. However, those three applied together, there might be a memorandum between them and they share it inside is there internal problem. We look at them as one block Gomes said that what JDA gave was 65 per cent, we believe that 65 per cent is fairly big enough, but that does not imply that JDA now monitor the internal distribution between them selves. Because the JDA is not capacity to do that we didn't chose the partners, they were the ones we chose themselves and brought themselves to us, but we considered as one unit and we they had 65 per cent.

The Executive Chairman reiterated "I seriously think it is even easier for the consortium now because if you have too many big companies together it is much moirZ difficult to reach an agreement. So I believe that two companies to reach an agreement is probably easier than three.

Once we are sure that the company in there has technical and financial capability, to operate in deep offshore which is case with either pioneer, Anardako or Devon, anyone of them we believe have technical and financial capability to operate deep offshore. We don't see any problem at all. In all the five blocks awarded, all the companies have written acceptance letters.

On the possible date that the authority expects the Joint Operating Agreement (JOA) and the Production Sharing Contract (PSC) be in place. He said: "We have provisional time bound. First of all we have one model standard contract which was signed with chevron. Our own target is that we could conclude the process by November and signature bonus paid one month later. So by December we hope everything should be completed."


http://www.guardiannewsngr.com/business/article03