30-05-03 Sao Tome and Principe, the poorest of Portugal's former colonies, could turn into a kind of African Kuwait due to immense oil reserves that are reportedly located around the tiny island nation. The former Portuguese overseas province located in the Atlantic Ocean off the coast of West Africa has signed a preliminary agreement with Nigeria to explore and exploit a small part of the reserves, in a "joint development zone".
President Fradique de Menezes recently announced in Portugal that under the treaty between his nation and Nigeria, Sao Tome and Principe will receive 40 % of oil revenues from the zone, while Nigeria -- Africa's largest oil producer -- will take 60 %. Drilling for offshore reserves is set to begin on the island's continental shelf, in the zone between Nigerian and Sao Tomean territorial waters in the Gulf of Guinea.

But the agreement did not put an end to the competition for concessions for taking part in offshore oil production. United States, Portuguese and Norwegian companies have submitted sealed bids, to be opened in October. The tiny archipelago of Sao Tome and Principe, which was colonized by the Portuguese in late 1470, declared its independence in 1975 -- the same year as Angola, Cape Verde, Guinea-Bissau and Mozambique, Portugal's other former colonies in Africa.
The West African island nation, which has a population of 128,000, is made up of the islands of Sao Tome, Principe, and a number of smaller isles, and has a total surface area of 964 sq km. It is located off the coast of Gabon, and not far from Equatorial Guinea, Cameroon and Nigeria.

With per capita Gross Domestic Product standing at just $ 290 a year, Sao Tome and Principe is one of the 30 most impoverished countries in the world. It is highly dependent on foreign aid, especially Portuguese, and a full 20 % of the population has emigrated to Portugal.
Up to the late 16th century, the colony was one of the most prosperous in the far-flung Portuguese empire, due to lucrative sugar cane plantations. But in the early 17th century, Portuguese landowners discovered that much larger and more productive sugar cane plantations could be established in the Portuguese colony of Terras de Santa Cruz, which later came to be known as Brazil, and the flourishing sugar cane business shifted to South America. Since then, Sao Tome and Principe has survived with its small cocoa and coffee plantations, an artisanal fishing industry that provides much of the daily local diet, and an incipient tourism industry, which drew just 3,000 visitors last year.

The discovery of offshore oil reserves has generated a sense of expectation among the impoverished local residents, most of whom are farmers. However, de Menezes warned that "people must be aware that we are not going to open a window to hand out dollars." But Rafael Branco, Sao Tome and Principe's Ministry of Public Works and Natural Resources, told the BBC that the priority was to channel the new funds into "sectors that deal with the conditions of our people -- health, education, fighting disease like malaria."
The sealed bids will not be revealed until October. But when they were presented in April, each firm paid $ 30 mm in registration fees. Portugal seems determined not to miss out on this opportunity. Deputy Minister of Foreign Relations Antonio Loureno dos Santos made a three-day visit to the islands "to discuss various aspects of bilateral relations," according to a communique released by the Ministry of Foreign Relations.

According to Minister Branco, the US companies ExxonMobil and Environmental Remediation Holding Corporation (ERHC), Portugal's Petrogal, and the Norwegian Geo-Services have submitted bids. The participation of Shell is ensured by the preliminary accord that Sao Tome and Principe signed with Nigeria, where the Anglo- Dutch oil giant has major interests.
The agreement with Nigeria includes a "cash advance" for an undisclosed amount, which is to go into the Sao Tome and Principe government budget. The amount will be revealed "in the next few months," once a final treaty on the exact delimitation of the maritime borders between Nigeria and Sao Tome and Principe has been reached, said Branco. Tourism operators are also beginning to see the archipelago as a potential source of significant revenues in the near future.

For two and a half decades, visitors to the islands have described them as "paradisiacal", and compared them to the more well-known Maldives, Seychelles and islands of Polynesia. But the development of the local tourism industry has been limited by the monopoly held by Transportes Aereos Portugueses (TAP) over flights to Sao Tome and Principe.
TAP took advantage of its privileged position to set high ticket prices, and it has a captive clientele -- people from the islands who live in Portugal and have no choice but to fly on TAP to visit their families back home. The rest of those who fly to the islands tend to be wealthy tourists who visit luxury resorts, the biggest of which has just 24 cabins.

Thisyear, the Portuguese firm Air-Luxor was authorized to compete with TAP, and the Portuguese company Rotas da Africa has already begun building new tourist resorts, described to IPS as "green oases in the middle of the blue-green sea" by Alvaro Morna, a Portuguese expert on African affairs. The main customers will continue to be Portuguese and French tourists, but the islands "also provide a tranquil haven for African politicians, who are protected there from indiscreet gazes," he added.
In 2001, the last year for which the Portuguese Cooperation Institute published figures, Sao Tome and Principe received $ 36 mm in development aid. Future oil revenues should make the country less dependent on such aid.
"Life on those placid forgotten islands has been suddenly altered by the comings and goings of politicians and businesspeople from Angola, France and Portugal," said Morna, who added that "the prospect of a market where everything is left to be done has just opened up" in Sao Tome and Principe.