Nigeria cancels South Korean oil exploration deal

Nigeria has cancelled exploration rights at two major offshore oil fields awarded to a South Korean consortium in 2005, members of the group said, dealing a blow to Seoul's efforts to raise its reserves.
The cancellation of the rights by the top African oil producer is, however, a gain for India's top energy explorer Oil and Natural Gas Corp (ONGC) as Nigeria restored its right as the winning bidder for the two highly prospective deep-water oil exploration rights in the Gulf of Guinea.

ONGC lost out to the Korean consortium in 2005 as South Korea promised the impoverished OPEC member massive investment in its neglected infrastructure, something most oil majors and Indian rivals were not prepared to do.
"Nigeria informed our consortium that it will cancel the rights because the consortium failed to fully pay the investment that the group had agreed to honour in 2005 when the rights were awarded," consortium members Daewoo Shipbuilding and Korea Electric Power Corp said.

The consortium,led by state-run Korea National Oil Corp, paid $ 92 mm in cash and offered a letter of credit to pay an additional $ 231 mm to cover their 60 % interest in oil blocks OPL321 and OPL323, they said. The blocks could hold as much as 1 bn barrels, according to preliminary estimates.
"We have met our obligations through official negotiations with the Nigerian government and can't understand the decision because the payment issue, which has never been raised in the previous government, suddenly become a matter under the current government," KNOC said. "We are seeking various countermeasures including legal steps and diplomatic solutions to restore the rights or get refunded."

The cancellation of the rights by Nigeria, the world's eighth-biggest crude exporter, is a setback in South Korea's state-backed drive to increase its energy security by increasing its oil reserve holdings six-fold.
South Korea aims to boost its self-sufficiency ratio for oil and gas to 7.4 % this year, or daily production of 53,000bpd. The country, which imports all of its oil and is the world's fifth-largest crude buyer, signed the production sharing contracts with the Africa's top oil producer in March 2006 when its then president, Roh Moo-hyun, visited the country.

South Korea promised to build a 1,200-km (745-mile) gas pipeline from the southern delta to the capital Abuja and 2,250 MW of power generation in return for the exploration rights. The two oil fields are also 30 % owned by British-listed firm Equator Exploration and 10 % by a local Nigerian firm.
Equator said earlier that it had been also informed of the decision to restore the status of the ONGC consortium as the winning bidder, subject to their payment in full of a $ 485 mm signature bonus within 60 days of Jan. 6, 2009. The cancellation of the rights also comes as Nigeria, which has one of the world's highest incidence of piracy, struggles with tumbling oil output, hit by frequent attacks on oil industry facilities and kidnappings for ransom.