Nigeria and Sao Tome give oil rights to ExxonMobil and Chrome

Jan 06, 2004 01:00 AM

Nigeria and Sao Tome have asked two oil companies to exercise their preferential rights over a shared offshore province to open the way for an exploration licensing round, authorities disclosed in Abuja recently.
US-based giant, ExxonMobil and Nigerian-owned Chrome Energy, also known as Environmental Remediation Holdings Corporation (ERHC), have been given 45 days to take up their rights, ceded to them by Sao Tome before the creation of a Joint Development Authority (JDA) to oversee the border area in 2001.

"We agreed that the two oil companies already operating in the area, ExxonMobil and ERHC, be allowed to exercise options in the various blocks," Saudu Balambe, a junior minister in Nigeria's foreign ministry, told.
Bidding for the nine blocks, believed to contain billions of barrels of crude oil, was formally opened in Sao Tome in October amid considerable interest from multinationals.

The Gulf of Guinea is set to become an increasingly important source of oil for the United Statesas it seeks to reduce dependence on the Middle East. OPEC member, Nigeria, is Africa's largest oil producer and the tiny West African archipelago of Sao Tome and Principe will be the latest entrant into the sector.
Oil companies have already made several huge oil discoveries in the deep waters of the Gulf of Guinea, and 20 companies, including Shell, ChevronTexaco, Total and Statoil, submitted bids for JDA acreage in October. ChevronTexaco made the biggest offer of $ 123 mm for 100 % of the block one licence.

But before they know if they have won anything, ExxonMobil has 30 days to take up an option on three blocks of their choice: up to a 40 % share in one block; and up to 25 % in two more.
Once Exxon has made its choice, Chrome Energy has 15 days to exercise its right to a share in six of the nine blocks: up to 15 % in two blocks; up to 20 % in two; up to 25 % in one and up to 30 % in one. The two companies cannot have more than 40 % interest in any one block, according to the terms explained by a JDA spokesman in Abuja.

The deals between ExxonMobil, Chrome and Sao Tome have been renegotiated several times and criticised by rights groups, which argue that they give the companies undue rights over Sao Tome's sovereign wealth.
Other potential investors have also criticised the deals, which could mean they have to partner with Chrome even though the company has a limited track record in the industry. Under the JDA agreement, Nigeria will get 60 % of the revenues and Sao Tome will get 40 %.

Source: Vanguard
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