Nigeria, Sao Tome Meet Over JDZ Oil Blocs
From Onyebuchi Ezigbo, in Abuja, 11.17.2005
The Joint Ministerial Council (JMC) of the Nigeria-Sao Tome and Principe Joint Development Zone (JDZ), yesterday met to ratify a prototype of the Production Sharing Contract (PSC) agreement that will govern exploration and production activities in five oil blocks recently allocated.
The meeting, which had in attendance Nigeria’s Minister of State for Petroleum Resources Dr. Edmund Daukoru along with his counterpart from Sao Tome, considered the draft proposals on the PSC.
The PSC is a form of agreement where the operating company funds 100 percent, exploration activities in an oil block up to production level. The winners of the five oil blocks are expected to sign the agreement by mid next month.
The draft model PSC under consideration stipulates a revenue sharing procedure of 80:20 percent in favour of the oil companies while they are expected to pay five per cent as royalty as well as 50 per cent tax.
THISDAY gathered that the fiscal structure of the PSC is essentially
the same as the one adopted for bloc 01 being operated by US oil major Chevron.
Sources told THISDAY at the end of the close-door meeting that the formalization of the choice of Swiss firm, Addax Petroleum, as replacement to US independent oil company, Noble, as technical partner in bloc 04 of the JDZ was also concluded.
At an earlier meeting with officials of Chevron, operator of oil
block 01, JDA officials tried to clear all issues relating to commencement of exploration operation.
Yesterday’s meeting of the JMC also intervened in the matter regarding the disagreement between the Noble/Environmental Remediation Holding Company (ERHC) granted Addax Petroleum Company a stake in the operation of oil block 04 previously won by Noble/Environmental Remediation Holding Company
(ERHC) in the Joint Development Zone to Addax Petroleum Company, as the new operator.
The approval for the take-over followed disagreement between ERHC, in which Nigerian businessman Sir Emeka Offor owns major equity, and its foreign technical partner, Noble who won the bid for the operation of block 04 during the 2004 bid round.
Block 04 was won by the Noble/ERHC consortium. However, trouble began when Noble indicated its unwillingness to continue with the partnership and consequently withdrew from the deal.
Other companies with equity stake in block 4 include Conoil (20 %),
Hercules oil (10%), Godsonic Oil (5%) and Overt Oil, five percent.
Noble/ERHC, as the operator of the oil bloc, has equity of 60 percent.
The winners of the block are to pay a signature bonus of $90 million.
However, due to what officials of JDA described as irreconcilable
differences, Noble Oil Company withdrew from the partnership thus
paving for the authority to select another firm to take over its place.
Winners of the five oil blocs allocated in the 2004 bid rounds are
scheduled to make payment of signature bonus amounting to $283m by December 2005.
During the 2004 bid round, Devon/Pioneer/ERHC as the operator with 65 percent equity, won Block 02. The signature bonus for the block is $71 million. Others who got equity in the block were Equator Exploration/ ONGC Videsh, 25 percent; A. & Harmattan, 10 percent; Foby Engineering, five percent and Momo Oil & Gas, five percent.
Anardako is the lead operator for block 03, with 51 percent equity and a signature bonus of $40 million. Others who won equity include
Devon/ERHC, 20 percent; DNO/EER, 10 percent; Equinox, 10 percent and Ophir/Broadlink, four percent. ICC/OEOC Consortium is the lead operator for Block 5 with a signature bonus of $37 million. Its equity is 75 percent. ERHC has equity of 15 percent while Sahara has 10 percent.
For Block 06, the lead operator is Filtzim-Huzod Oil & Gas with equity of 85 percent. ERHC has equity of 15 percent in the block.
Of the successful bidders, Devon/Pioneer/ERHC, Devon/ ERHCand Noble/ERHC won the bids as operators including their existing rights. ENHC won their equity for Blocks 5 & 6 plus their existing rights.
The first process of acreage allocation in the JDZ began on August 23, 2003. That opened the 2003 JDZ Licensing Round for nine (9) blocks (Blocks 1 to 9).
The first oil Bloc with surface area of 704 sq. km was awarded
to Chevron as the operator with 51% interest, ExxonMobil and Dangote Equity Energy Resources (DEER) with participating interests of 40% and 9%, respectively.
