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Wednesday, February 08, 2006 4:51:29 AM
By Ben Berkowitz and Estelle Shirbon
650 words
7 February 2006
14:15
Reuters News
English
(c) 2006 Reuters Limited
(Recasts, adds comments from Nigerian minister of state for petroleum)
NEW YORK/ABUJA, Feb 7 (Reuters) - Pioneer Natural Resources Co. is exiting two exploration blocks in Africa's Gulf of Guinea after failing to agree to terms with its local partner, the U.S. oil independent said on Tuesday.
Pioneer's withdrawal from partnership with ERHC was the latest blow to an oil exploration licensing round conducted last May by the Joint Development Authority of Nigeria and Sao Tome, which has yet to see any contracts signed.
"It had to do with an inability to negotiate an acceptable agreement with our partner," said a Pioneer spokeswoman.
ERHC President and CEO Walter Brandhuber said Pioneer was "unable to meet the timeline set for executing the various agreements" with the Joint Development Authority (JDA).
Brandhuber, who is in Nigeria, told Reuters ERHC had a new partner lined up for block 2, in which it and Pioneer had a 65 percent stake and were the operators. He said he could not yet identify that partner.
An industry source familiar with the Joint Development Authority said China's Sinopec Corp. was aiming to replace Pioneer but this had not yet been approved.
Nigeria's Minister of State for Petroleum Edmund Daukoru declined to comment on Sinopec, but told Reuters he expected an "equally credible" partner to replace Pioneer.
The licensing round was repeatedly delayed before the blocks were finally awarded. Negotiation of the contracts has also been delayed, with companies pulling out, allegations of bribery and wrangling between partners bogging it down.
The Gulf of Guinea, where the joint development zone is located, is a prime exploration hotspot but political tensions in Sao Tome and Principe have risen as the tiny twin island nation prepares to enter the world of big oil.
CONTRACTS TO BE SIGNED
Daukoru, speaking just after a meeting with his counterpart from Sao Tome and other ministers, said the JDA would sign production sharing contracts on all blocks awarded last May at the end of this month, with the possible exception of block 2.
He said it would be "a little tricky" to meet the timeline for that block in light of Pioneer's withdrawal, but he was confident ERHC and a new partner would sign a contract soon.
Pioneer is the second company to pull out of a partnership with ERHC in block 2. Devon ducked out last year. In block 4, ERHC also lost its initial partner when Noble Energy withdrew and was replaced by Swiss-based Addax Petroleum.
ERHC, listed in the United States but controlled by private Nigerian firm Chrome, has sparked controversy in Nigeria and Sao Tome since it emerged as the big winner of the licensing round despite having little exploration experience.
It was the only company to gain stakes in all five blocks awarded last May. It was named operator, along with other companies, in two of the blocks.
The authority says ERHC had been granted preferential rights on stakes in the blocks in return for exploration investment in Sao Tome in the 1990s, before the joint development zone was set up. Details of those investments have not been made public.
Late last year, the Sao Tome attorney-general said there were indications that ERHC made improper payments to Sao Tome officials. The company has denied any wrongdoing.
Daukoru said the Sao Tome ministers had disowned the attorney-general's report during Tuesday's meeting.
"It's internal politics. We are preparing a detailed response (to the report) which will be in the public domain. Our first inclination was to ignore it completely but we don't want our silence to be interpreted the wrong way," he said.
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