ERHC Energy Inc (ERHE)

[RUBY1100]

“My first reaction is just to reject the report in its
entirety” says Edmund Daukoru


By Tom Ashby
KUWAIT, Dec 13 (Reuters) - Nigeria's top oil official
questioned on Tuesday the durability of a treaty with Sao Tome
after the island nation called for a U.S. bribery probe into
their joint award of oil licences.
Nigeria and Sao Tome were due to sign five oil exploration
contracts with foreign investors this week, but Sao Tome's
attorney-general said the deals may be void because of
indications that U.S.-based ERHC ERHE made improper
payments to Sao Tome officials.
ERHC said it had no contact with officials during the
licensing process.
Nigerian Minister of State for Petroleum Edmund Daukoru told
Reuters in an interview that the report was based on poor
information and a product of internal wrangling at the top of
the Sao Tome government.
"My first reaction is just to reject the report in its
entirety. They cannot come after the event to condemn because of
their own internal politics," Daukoru said.
Sao Tome was struggling to cope with a system of government
where the president is from one party and the prime minister
from another, Daukoru said.
"I see a basic inability to weave a national consensus even
on small issues. We are being made to appear as if we are
forcing things on them."
Sao Tome entered into an agreement with ERHC many years ago
giving the company preferential rights to equity in Sao Tome's
oil acreage and valuable waivers in exchange for technical and
financial services. The company was later acquired by a Nigerian
businessman and floated on a U.S. stock market.
The deal acquired new significance when the tiny island
nation signed a treaty with Nigeria in 2000 to put aside a
border dispute and develop the offshore oil resources jointly.

BIG WINNER
ERHC was the biggest winner in May's joint exploration
licensing, winning joint control of two blocks and a stake in
three others. Its share price has risen sharply on hopes of a
big find. Other companies involved in the licensing included
Addax, Devon DEV and Anadarko APC.
U.S. giant Chevron CVX had previously won drilling
rights on another joint block.
The report said that Sao Tome would lose $58.6 million
because of waivers accorded to ERHC, and that the rights given
to the little-known company were so favourable that they might
violate its law by alienating control of its natural resources.
It called for an investigation by the U.S. Securities and
Exchange Commission into the alleged payments.
Daukoru said that if Sao Tome wanted to amend or withdraw
benefits it accorded to ERHC, it was free to do that
unilaterally, but it should not endanger the whole process.
"Even after the round, whatever equity belongs to ERHC they
can expropriate or buy, whatever," Daukoru said.
Daukoru said the attorney-general's report falsely accused
Nigeria of being overbearing in negotiations with foreign
investors.
"For anybody in Sao Tome to be holier than thou really
surprises me. If they were to operate that place alone, they
would get worse things than what we got working together. They
have benefited from our experience," Daukoru said.
Daukoru said the contracts were negotiated over a period of
several months by a joint development authority headed by a Sao
Tomean, and that Nigeria had conceded several points to Sao Tome
to get a deal signed.
"We have entered a treaty with them which in hindsight, one
wonders ... In a case where every issue has to be dealt with in
conference with the two countries, I don't know how long it will
work. But having entered into it and until the treaty is
revised, we have to show patience."
((Editing by Brian Killen; Reuters Messaging
[e-mail]; Lagos newsroom; +234 1 263
1943))