JDZ: Five Years Of Solid Achievements
By Sam Dimka
Repost - but worth a second read as we anticipate more PCSs within day[s] !!!!!
It has been five year since Nigeria and Democratic Republic of Sao Tome and Principe resolved to enter into a partnership for the development of the Joint Development Zone (JDZ), which came as a product of extensive consultations and negotiations between the governments of the two countries.
In what started as a maritime boundary dispute involving claims and counter-claims of the land bordering the two countries, a consensus that was later forged culminated in the signing of a formal Treaty in Abuja on February 21, 2001.
The Treaty derives its legal basis from the provisions of the United Nations Convention on the Laws of theSsea (UNCLOS). Specifically, Article 74(3) of the UNCLOS “encourages states with opposite coasts, in a spirit of understanding and cooperation, to make every effort, pending agreement on delimitation, to enter into provisional arrangement of a practical nature, which do not jeopardize or hamper the reaching of a final agreement on the delimitation of their Exclusive Economic Zones.”
Some key provisions of the Treaty include:
•The establishment of the JDZ in a specific area defined by coordinates.
•The establishment of the Joint Development Authority (JDA) to develop and manage the petroleum and other natural resources in the JDZ.
•The sharing of the proceeds in the proportion of 60 per cent (Nigeria) and 40 per cent (Sao Tome and Principe).
•The Treaty is valid for 45 years subject to a review after 30 years.
•Non-renunciation of claims for the period the Treaty is in force.
•A Joint Ministerial Council (JMC) to have overall political responsibility over the JDZ and to supervise the JDA.
The JDZ, an area of overlapping maritime boundary claims, is defined by 32 coordinates and covers an area of 34,540 square kilometres in the oil rich Gulf of Guinea. The Gulf of Guinea is one of the most prolific hydrocarbon provinces of the world. Intensive exploration efforts over the last 50 years have led to a succession of significant discoveries in some oil fields, notably Bonga, Agbami/Ekoli and Akpo fields in Nigeria and Zafiro and Alba in Equatorial Guinea.
The inauguration of the JDA on January16, 2002, barely one year after the signing of the Treaty, ushered a new dawn in the history of the two countries. No sooner had the JDA been inaugurated than it swung into action to work towards the fulfillment of its mandate, which include:
•To develop and manage the petroleum and other natural resources in the JDZ and
•To share the proceeds in the ration of 60:40 between Nigeria and Sao Tome and Principe correspondingly.
Upon its inauguration, the JDA carved out eleven oil blocks in the Northern part of the JDZ and articulated the fiscal regimes that would guide and regulate oil exploration activities in the zone.
Five years on, the JDA, as a corporate entity, has achieved remarkable successes in the pursuit of its mandate, considering many factors that impinge on the partnership between the two state parties. Some of the achievements recorded so far are summarized as follows:
•Spudding of the first exploratory well, OBO-1 by Chevron Texaco Corporation. Spudding of the well, which commenced on January 14, 2006, is on-going. Drilling of the well is progressing satisfactorily without pollution incident and/or accident. The well has been logged and 135/8 inch casing ran and cemented with a current well depth of 12,500 feet.
• Conduct of two Licensing Rounds, with the first (the 2003 Licensing Round that saw the award of Block-1 in April 2004), and the second (the 2004 Licensing Round that has led to the award of five Blocks (2-6) in May 2005).
•Realisation of US$123 million as signature bonus for Block-1.
• Signing of Production Sharing Contract (PSC) for Block-1 on February 1, 2005. The Operator of Block-1 is ChevronTexaco with 51 per cent equity, while ExxonMobil has 40 per cent and the remaining 9 per cent is for Dangote-Energy Equity Resources (DEER).
• Negotiations for PSC for Blocks 2-6 have almost been concluded and will be signed
•Conduct of a baseline study of the JDZ to guide oil and gas exploration activities. Samples and results are now being analysed.
•A study on the inventory of non-hydrocarbon resources in the JDZ has been commissioned and when concluded it will flag off in earnest the exploration of the non-oil resources in the JDZ.
• Establishment of the JDZ Investments, to, amongst others, pursue other investment opportunities and joint investment ventures that would yield revenue for sharing by the state parties.
That so much has been recorded in terms of concrete achievements is a reflection of the solid commitment of the two countries to look beyond the challenges they often come against with a view to realizing the goals and objectives of the Treaty.
Being an entirely new arrangement, the major challenges have to do with long negotiations, discussions and consultations on issues to build a consensus that would stand the test of time.
The delays in the fashioning and concluding contracts, which have resulted in the seeming prolonged extension of the schedule for the signing of some of the agreements, are basically a demonstration of all the parties to ensure diligence and thoroughness, avoid costly mistakes and omissions that might jeopardize their interests either in the short term or in the long run.
Within a few days away from the signing of the Production Sharing Contracts (PSCs) for Blocks 2-6, the spudding of the first exploratory well and lofty plans for future developments that will positively impact on the economies of the state parties, the JDZ development model is worthy of emulation.
Indeed, the JDZ has become a veritable tool for conflict resolution and economic integration in regional and international politics.
Dimka is Head, Corporate and Public Affairs, Nigeria-Sao Tome and Principe JDA
