ERHC Energy Inc (ERHE)

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New Energy Intelligence (???) Group article

ERHC suffers another blow offshore Sao Tome
311 words
10 February 2006
Energy Compass
English
(c) 2006 Energy Intelligence Group. All rights reserved
ERHC Energy suffered another desertion in Nigeria's joint development zone (JDZ) with Sao Tome and Principe this week when Pioneer Natural Resources turned its back on the Nigerian-owned firm. Pioneer, which was earmarked to operate a joint 65% stake with ERHC in Block 2 and a 20% stake in Block 3, is the third US company to abandon ERHC, which has few assets bar its rights to the JDZ. In November, Noble Energy pulled out of a joint 60% stake on Block 4 after Devon Energy -- a one-time cobidder with interests in Blocks 2 and 3 -- exited in July.

Pioneer gave no reason, but signs are that the burden of carrying US-listed ERHC and several Nigerian freeloaders put too big a strain on negotiations over joint operating agreements. ERHC put a positive spin on the affair, boasting that China's Sinopec was ready to sign up for Block 2. It has brought Addax, a Swiss company with strong Nigerian connections, in to replace Noble in Block 4. Sao Tome argues that the blocks should first be reoffered to original high bidders like Anadarko.

ERHC hopes to finalize joint operating agreements with new partners by the end of February and sign production-sharing contracts with the joint development authority soon after, although the negotiating process could yet unravel. The company is highly unpopular in Sao Tome, where politicians say Nigeria forced them to sign a highly advantageous deal with ERHC at their expense (EC Oct.25'02,p4).

But the Nigerians aren't finding things easy, either. ERHC's owner, Emeka Offor, has seen his bank, African Express, closed after failing to meet recapitalization targets, while sources say the collapse of Nigeria's Hallmark Bank has swallowed up the country's share of signature bonuses from the first JDZ round.