Sao Tome to regulate use of new oil riches

The government of Sao Tome and Principe plans to put forward legislation which will clearly outline how expected new oil revenues are to be used, the prime minister of the west African island state said.
The law should be ready before the first payments for oil exploration rights come later this year, Prime Minister Maria das Neves told in Lisbon following talks with her Portuguese counterpart Jose Manuel Durao Barroso.

She said the oil revenue management law, which is being prepared by a commission made up of lawmakers with the input of the public, would ensure any new riches go towards the development of the country.
"Oil could be our heaven, purgatory or hell, it all depends on how Sao Tome faces up to this challenge," she said. Das Neves said the law would ensure some of the expected oil revenues would be set aside for when the oil runs out.

The former Portuguese colony, which lies 240 km (150 miles) off the west African coast, is one the poorest countries in the world. Sao Tome'saverage annual income per person is $ 280 (EUR 219).
The country of some 140,000 people has up to now relied almost exclusively on the export of cocoa for foreign currency revenue, which has suffered a major decline due to drought and the low price of the commodity. But since 1995 huge oil deposits have been detected in the waters of Sao Tome and Principe which have stirred international interest, as well as local fears about how the future wealth will be shared. Some studies suggest the islands, which gained independence from Portugal in 1975, sit on between 6 and 11 bn barrels of crude oil.

The archipelago is expected to open bidding for exploration blocks in its waters later this year, following the auction of blocks last April in the zone it shares with Nigeria which should generate more than $ 200 mm (EUR 157 mm) for the islands in 2004. Once the bidding for the offshore areas is complete, Sao Tome is set to receive 40 % of the revenues, while Nigeria, Africa's largest oil producer, will receive 60 %.
Sao Tome authorities expect the revenues from the archipelago's own offshore oil reserves will start flowing into state coffers within three to four years. The prospect of oil income has raised tensions on the archipelago over how the new funds will be spent.

Last July soldiers briefly took power in a bloodless coup while President Fradique de Menezes, a wealthy businessman, was on a visit to Nigeria.
The head of the military junta which staged the short-lived coup said he had acted to demand better living standards and ensure that when the oil profits start rolling into the country everyone will benefit.