Sao Tome moves to invalidate oil treaty with Nigeria

Oct 14, 2002 02:00 AM

Still smarting from the loss of the Bakassi Peninsular, Nigeria faces another grim prospect of a tussle over an oil-rich region, following indications that Sao Tome and Principe is seeking to invalidate its treaty with the country over exploitation of resources in the Gulf of Guinea. The lucrative region is administered by a Joint Development Zone (JDZ) set up by Nigeria and Sao Tome.
President Fradique de Menezes of Sao Tome and Principe was making moves to initiate a licensing round on his own exclusive economic zone. Earlier seismic studies made available by the JDZ indicated that the region held an estimated 4 bn barrels of oil.
However, due to the inability of the Energy Ministers of both countries to meet and agree on the terms and guidelines for the administration of the region, the proposed awards of oil blocs in the region scheduled for early this month, had failed to materialise. According to sources, President Menezes who replaced his entire cabinet, was set to pursue a differentagenda on acreage licensing.

Nigeria Petroleum Ministry officials have however, kicked against the Sao Tomean move, describing it as "unworkable". "For the blocs in the Joint Development Zone (JDZ), there is no government that can call for bids alone," said a top official of the authority.
"The JDZ is governed by a treaty signed between Nigeria and Sao Tome. If any one government wants to go it alone then it means the treaty will have to be reviewed. The treaty is deposited in the United Nations. "To nullify the treaty is a tedious process. The guidelines have to be approved by a ministerial council," said the official.

Nigeria's Presidential Adviser on Petroleum and Energy, Dr Rilwanu Lukman, had earlier hinted that nine blocks would be put on offer by end of last month or early this month. JSZ officials, however, insisted that the political upheaval in the tiny Island aborted the call for bids for the blocs in the region, and that a scheduled meeting to ratify terms and conditions for JDZ licensing was aborted at the last minute.
JDZ officials said the body had sought to speed up activity in the area by pushing hard on the window agreed for initial exploration. "We believe that following the reconstitution of the new cabinet the ministerial council meeting of the JDZ can now hold and the award process set in motion very soon," the official told.

It was further gathered that Sao Tome had nursed resentment against the treaty, which gave Nigeria 60 % equity of resources in the Gulf of Guinea and Sao Tome, 40 %. The grouse was also that the only position occupied by Sao Tomean technocrats in the JDZ was that of director of non-hydrocarbon resources.
The treaty will last for 45 years and renewable after 30 years. The Joint Development Authority (JDA), the body managing the zone, is currently putting together the Petroleum Regulatory Regime, the Petroleum Tax Regime, the PSC. The Gulf of Guinea is seen as one of the most prolific oil and gas provinces in the world.
Officials said 6 bnbarrels of crude oil await discovery in the zone. First oil is billed to flow by the fourth quarter of 2004 with a first licensing round beginning later this year. Independent sources put the total reserve estimates of the zone at 10 bn barrels divided into 25 acreages stretched across 34,000 sq. km. One of the major deep offshore discoveries in Nigeria, the Apko Well owned by TotalFinaElf, lies 20 km from the northern tip of the zone.

Nigeria is Africa's biggest crude oil producer with a daily output of around 2.0 mm barrels. The strategic position of Sao Tome and Principe in the oil rich Gulf of Guinea shapes to a larger extent, Nigeria's diplomatic relationship with the tiny island.
Federal Government offered Sao Tome a $ 5 mm loan to develop that country's oil and gas sector. The loan was the latest in the flurry of bilateral agreements between the two countries. Nigeria lost the ownership of the oil-rich Bakassi Peninsula following the International Court of Justice (ICJ) ruling which awarded the control of the region to Cameroon.

Source: This Day
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