Replies to post #243131 on ERHC Energy Inc (ERHE)

[kingpindg]

Seek, they really should clear that up...

as the language is confusing. But, if CPC did not relinquish a portion of the block back to the government, then how could ERHC get a portion from the government. If I recall correctly, the original interests in BCOIII were CPC 70%, Chad 30%. Now that they've discovered oil in the block, Chad is going to give us their 30%, plus take 20% from CPC to give to us. Doesn't make sense.

[petemantx]

When a percentage of a block is relinquished after Phase I as we must do with our JDZ blocks and which is the question with our Chad Ouest block, does the relinquished acreage have to be contiguous or can the original block holder gerrymander the returned area so as to keep all the prospective property to themselves?

[ERHClongtimer]

OPIC & Chari Ouest Block III

Seek, Kingpindg read my mind...

"if CPC did not relinquish a portion of the block back to the government, then how could ERHC get a portion from the government. If I recall correctly, the original interests in BCOIII were CPC 70%, Chad 30%. Now that they've discovered oil in the block, Chad is going to give us their 30%, plus take 20% from CPC to give to us. Doesn't make sense."

But here is more information to support the conclusion that ERHC received a relinquished portion of Cheri Ouest Block 3. According to this source (page 4), OPIC's initial exploration contract expired on May 24, 2011 (translated from French):

"Overseas Petroleum and Investment Corporation (OPIC), a branch of CPC, a national Taiwanese specializes in petroleum exploring discreetly Chad for almost 5 years. According to an exploration agreement officially ending May 24, 2011, that company makes exploration in three blocks namely Block Lake Chad (BLT I) north of Noko, the Bloc Sud Chari (BCS II) in the area of ??Dembo and Maro and the Bloc Chari Ouest (BCO III) in the area of ??Bemiran, Canton Kiagor (Ngourkosso department, re-administrative region of Logone Occidental). In this block, OPIC makes a well test and the results should guide its trading decisions of the exploration permit or not with Chad."

From a CPC source that I will not disclose, we have this information about OPIC's exploration contract (translated from Chinese, so the narrative is a little rough):

"Mining exploration contract 4 years, extended twice, each time for 3 years. 4-year exploration major work duties: 1-year exploration: the localization and re-measured magnetic survey, the first 2 years of exploration: the 1,000 km seismic survey, processing and interpretation and to locate the possible drilling of wells 1; 3-year exploration: drill an exploration well. The first 4 years of exploration: drilling and drilling after the review. In the end of each exploration Jieke opt not to complete the work obligation, the fine is $9,000 per kilometer seismic and exploration wells per population 5 million."

From The Economist Intelligence Unit, we learn OPIC's exploration permit was granted on January 26, 2006:

Chad industry: Taiwanese firm gets oil-exploration permit

June 2nd 2006

COUNTRY BRIEFING

FROM THE ECONOMIST INTELLIGENCE UNIT

On January 26th the minister of oil, Mahamat Nasser Hassan, announced that the government had granted an exploration permit to a Taiwanese company, Overseas Petroleum and Investment Corporation (OPIC), a subsidiary of the Chinese Petroleum Corporation. The permit covers 26,250 sq km on three oil blocks in the Lake Chad Basin, Chari Sud Basin and Chari Ouest Basin. The new contract differs from the concession-type convention previously signed with Esso and the Clivenden-Encana joint venture. Under the concession- type convention the government grants a private company or a consortium a licence to extract oil, which becomes the company's property once extracted; the company pays the government taxes and royalties for the oil.

The OPIC contract stipulates that the government will receive from OPIC royalties of 12.5% and income tax of 50%, and that production will be shared (30% for the government and 70% for OPIC). In addition, investments for the launch of the four-year exploration project, estimated at US$30m, will be financed by OPIC. A new element in the management of oil resources by the government is the division of the oil basins in different zones to allow for diversification of the investing companies, which are now granted only part of the basin. Negotiations between the government and OPIC started in January 2005.

With the above date, a four-year exploration period would end on January 26, 2010. However, back to the CPC source for a timeline of work done in the block (again, translated from Chinese):

"Mine were in 2006-2007 to complete the investigation of the geographical environment, surface analysis and interpretation of geochemical surveys, magnetic data re-processing and re-interpretation of mining environmental impact assessment; completed in 2008, about 1,000 km of two-dimensional (2D) seismic test facilities and seismic data processing and interpretation, quality control and supervision of work (3-6 months period after 2006 years, 11 months and the rebels in February 2008 Check here to attack the civil war events affected the progress of work)."

"2009 January has entered the initial exploration period of the fourth period, should be in 2010 January 24 perform an obligation well, the company in addition to actively carry out the transfer of mining rights, but also in May 2009, first complete the drilling engineering, drilling was completed in June 2009 the tender contract documents, and twice to the Chad government plans to apply for an extension of the implementation of drilling a total of 16 months to 2011 on May 24, by Chad Oil and Energy agreed. Another mine in accordance with the contract written request of the Ministry to extend the cooperation of the group apply to enter the first exploration period of the extension of the deadline period, also approved extended to 2011 on May 24."

So, from the above information, it is apparent that OPIC's first exploration period, with the 16-month extension, ended on May 24, 2011. Likely, the end of the first exploration period would trigger a relinquishment event.

With earlier exploration contracts granted by the Chad government, a 50% relinquishment was standard, as disclosed by Chad’s Oil: Miracle or Mirage?:

"The ExxonMobil consortium signed a new convention with the government of Chad on May 10, 2004.... The convention grants an exploration permit for five years from February 3, 2004, with an option for a five-year renewal. The Consortium must relinquish 50 percent of its permit area after the first five years."

"... The sizeable Canadian company EnCana, in consortium with tiny Cliveden Petroleum Company, holds the rights to Permit H, a massive permit area of 430,000 sq. km. (the size of Spain), covering all or part of each of Chad’s seven oil basins. EnCana signed a convention in 1999 covering exploration and exploitation and will have to relinquish 50 percent of its acreage in January 2005".

So, in absence of specific details from ERHC, the logical conclusion from the information above is that CPC relinquished 50% of its contract area on May 24, 2011. ERHC announced its Chad block awards on June 30th. - LT