Nigeria-Sao Tome joint development zone: A new NEPAD dawn

Nov 16, 2003 01:00 AM

by Emma Ujah

Nigeria and the island nation of Sao Tome and Principe have demonstrated the true African brotherhood, the guiding principle of the New Partnership for African Development (NEPAD) by establishing the Joint Development Zone (JDZ) in corresponding to the overlapping Maritime Boundaries of the two countries.
This development put paid to what could have culminated in a war between the two countries. Rather than waste soldiers and or hard earned foreign exchange at the World Court over the boundary dispute, the leaders of the two nations met in 1999 and agreed to jointly develop the resources in the area in contention for the mutual benefits of the two nations.

At the end of the negotiations, it was agreed that the resources in the area which is about 34,504 sq km in the Gulf of Guinea be developed and managed by both countries and the proceeds jointly shared on a 60/40 %. While Nigeria is to have 60 %, Sao Tome and Principe is to have 40 %.
A treaty to this effect was signed by President Olusegun Obasanjo for Nigeria and his Sao Tomean counterpart, Mr Fradique De Menezes for Sao Tome and Principe, in February, 2001. The treaty was subsequently ratified by the respective legislatures of the two partnering countries.

A Joint Development Authority (JDA) was, therefore established on January 16, 2002, to manage activities in the zone. The JDA which is headed by Dr Tajudeen Umar in his capacity as Chairman, while a Sao Tomean, Mr Flavio Dos Santos, is Secretary of the Board.
The oil finds in the JDZ which is estimated to be one of the richest deep offshore in the Gulf of Guinea definitely marks the beginning of a new era for the two countries. For the Democratic Republic of Sao Tome and Principe the small-island nation of a population estimated of between 130,000 and 150,000 has joined the league of world oil producers.

Erstwhile former Minister of Petroleum, past President of OPEC, Secretary-General and immediate past Presidential Adviser on Petroleum and Energy, Dr RilwanuLukman, described the Nigeria-Sao Tome and Principe partnership as unique.
"The unique formulation of the JDA is captured in the very nature of the partnership. A partnership between one of the continent's largest countries and one of its smallest. A partnership between a country with a large established oil and gas industry with one that has no production. A partnership between two peoples of entirely different cultures and backgrounds", he said. Dr Lukman who was one of the architects of the joint development arrangement added that the "varying backgrounds and perspectives will serve as counterbalancing influences in the operations of the venture”.

The process of acreage allocation in the JDZ began on August 22 this year when the Federal Government, acting in collaboration with the government of Sao Tome and Principe opened the Licensing Round. The ceremony was essentially to provide oil companies the guidelines on who could apply and how. They were given up to October 18, this year, to submit their commercial and technical proposals for the initial nine oil blocks put on offer.
At the expiration of the deadline, 33 bids were received from 20 oil firms: both multinationals and indigenous companies. OPL 1 which was described as the richest of the blocks attracted the highest bids. There were 12 bids for that block alone. OPL 4 was the next in that order with six bids, followed by OPL 2, which attracted five bids. OPL 6 had four bids, OPLs 3 and 5 had two bids each, while OPLs 7 and 9 also had one bid each. OPL 8 was not bided for.

The Chairman of the JDA, Dr Tajudeen Umar expressed satisfaction at the quality and number of oil companies that submitted bids for the oil blocks.
“We are quite satisfied with the numbers of bids we have received but more than that we are impressed by the calibre of companies that bided. Here we have some of the best oil companies in the world in terms of experience and capabilities. It is also gratifying to see that there were many indigenous oil companies that haveshown interests in the blocks.”
The chairman, however, explained that the allocation of the oil blocks would not just be based on the highest bidder. According to him, the selection committee would closely look at the technical proposals of each bidder and match them against the guidelines released in August before deciding which company gets what.
According to him, "we will be fair and transparent in our evaluation", adding we will leave each commercial bid intact until we are satisfied with the technical proposal of each bidder." The results could be out before the end of the year. He also disclosed that another licensing round would follow but after the current one is dispensed with. He said that it might not be before the next two years.

The technical criteria, according to the guidelines for investors which was earlier issued by the Nigeria-Sao Tome and Principe Joint Development Authority (JDA) are: Technical Capability, Work Programme Commitment, Geological Interpretation, Development Proposals, Environmental Policies, and Local Content. According to the guidelines, evidence of each company’s capability must give details of experience and expertise in exploration, development and production.
Such claims are to be supported by a listing of the company's participation in oil and gas ventures, clearly indicating: Country of operation, block, terrain (land, swamp, shallow offshore, deep offshore), percentage stake held by company, status of project (exploration, development or production), and production level. The work programme is to include the number of wells the company is willing to drill; Seismic data to be acquired is also to be indicated, with the various phases and their costs.

On geological interpretation, each bidder is to present a detailed prospects in the block bided for, while they are also to outline their development plans for the development of associated gas. The technical bid is also to contain detailed environmental policies of the company, with particular reference to environmental impact assessment. On local content, the authority's guidelines provide that each bidder should state its commitment to the training and growth of indigenous capacity, indigenous manpower and the use of local industry of either or both Nigeria and Sao Tome.
This proposal, it said, should be specific in terms of number of persons to be employed, trained, costs and benchmarks for the use of local goods and services. The JDA said that only technical bids that achieve 60 % and above will be allowed to proceed to the next phase of Commercial Evaluation.

The Commercial Evaluation has two major items: Signature Bonus and Projects to be undertaken in either or both countries (Nigeria and Sao Tome). The guidelines provide that each bidder must state the amount it wants to pay for each block for which the bid is submitted. It is not to be less than the minimum acceptable amount of $ 30 mm per block. All bonuses offered shall be paid in one tranche and non-tax deductible and non-cost recoverable.
"Any commitment by the applicant to projects either social or otherwise in either or both States Parties will be considered. Such proposals should include cost estimates for each project", the JDA said. It added that the evaluation of the commercial offer would be based on a direct computation of all the commercial components of the offer.

The JDZ operates a mixed licensing and Production Sharing Contract (PSC) regime. Exploration Licences (EL), Oil Prospecting Licences (OPL) and Oil Mining Lease (OML) are to be granted to successful bidders. The JDA is to negotiate with individual successful bidders at the conclusion commercial evaluation.
The colourful ceremony at one of Sao Tome's most important building: Palacio dos Congresso (Parliament Building) was attended by everyone who-is-who in the small country. The president of Sao Tome and Principe Mr Fradrique de Menezes sat through the entire event.
Other dignitaries include the immediate past President Mr Miguel Trovoada, who was described as one of the architects of the Joint Development arrangement, as well as, the Prime Minister, Chairman of Supreme Tribunal of Justice, legislators and top military brass were all on hand to celebrate, as it were, the nation’s new down.

When it was time for president Menezes to address the audience at the bid opening ceremony, he could not hide his joy, describing the occasion as a historic one that would change the hitherto sleepy island to a hub of oil activities.
His words, "this is a historic moment of our history as we open these envelopes from the first bid round for nine blocks in the Joint Development Zone, where we will develop our potential hydrocarbon resources in partnership with our Nigerian brothers.”
"For centuries, Sao Tome and Principe has been a quiet sleepy place, first as a watering station for slave ships taking our African brothers to unthinkable lives on the plantations in the New World. Their unpaid labour made prosperous entire nations who were indifferent to their anguish. Some of these slaves were dropped off here, and for a time produced more sugar than any other place on earth.”
"Then coffee was introduced and we also became the largest producer of coffee. Finally cocoa was brought back from the New World, and for the third time we became the world's largest producer-this time of cocoa. Cocoa was our main resource in the past, but for some time now, cocoa is insufficient to develop the free and independent country we became on July 12, 1975."

The president revealed that were there foreign forces that made spirited attempts at scuttling the arrangement with Nigeria but that "good sense carried the day, as we knew we were on the right road".
He made it very clear that dubious oil companies would not be welcome in Sao Tome, observing that some oil companies were known to have colluded with political leaders in several oil producing countries to defraud the people, with oil money stolen abroad while the people are left in their poverty.
"The road tooil has many curves and potholes, as other countries who have walked there have learned. It is a road where many travellers become waylaid, robbed, beaten, or at the very least, lost. While we are good to you (oil companies), you must be good to us. Oil development in the JDZ cannot be a one-way street, paved with ‘take the money and run’ asphalt. I know that many oil companies say that they are responsible for the well-being of the countries where they operate and all but one refuse to publish what they pay.”

“Another multinational mantra is that oil companies are not responsible for how the money they pay is used. If a country's ruler asks them to deposit money in a Swiss bank account they do it. If they are aware that their payments are being misused they nod and wink and turn away while blaming it all on ‘those foolish and corrupt Africans’. But my friends, in order for someone to be corrupt, there must be a corruptor. Corruption does not emerge in a vacuum. There is always an enabler. Corruption also thrives in secrecy. But withers when exposed to the scrutiny of the public and careful professional oversight.”
"Sao Tome and Principe long ago stated that we will be open and transparent in our oil dealings. We have committed ourselves to the publication of oil revenues, and to regular and effective auditing of those revenues according to internationally accepted standards. We will implement a revenue management plan linked closely to the Millennium Development Goals of the United Nations. We will implement the best practices drawn from countries around the world. And we will go further to ensure that oil serves the people of Sao Tome and Principe for this and future generations. To achieve this, we will be working with a broad range of international and domestic experts."

President Menezes painted a picture of a people that have suffered much over the years, maintained a humble profile and have kept hope alive for a better future.
"We are known as humble, kind hard-working, generous people. We welcome strangers with warmth open hearts. But we have suffered much. Our ancestors were beaten under the lash of slavery. Our children do not have the education they deserve. Our adults struggle to feed their families for a month on incomes that are insufficient for even a day. Our old people suffer needlessly without proper medicine or hospitals. Life is very hard for most Sao Tomeans. But our spirits are not broken.”

“No doubt, Sao Tomeans must have learnt very valuable lessons from Nigeria. With oil revenue of more than $ 300 bn since the early 1970s, there is hardly anything to show for it in terms of development a buoyant economy. Rather, the nation now reels in an external debt of over $ 31 bn, while Nigerians hold as much as $ 107 bn in foreign accounts.”
“Rather than been a blessing, oil has been rather a curse for ordinary Nigerians. If Sao Tomeans are not to suffer the same fate then President Menezes' pledge must be made practical, when oil revenue begins to flow. Rather than build fat accounts for themselves in Portugal and Switzerland, he and other government officials should build the Sao Tomean economy.”

Source: Vanguard
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