HERE'S ONE TO WATCH OR BUY.
(COMTEX) B: Obscure local oil firm is chosen to work leases off Nigeria, S
B: Obscure local oil firm is chosen to work leases off Nigeria, So Tom ( Houston
WASHINGTON, Jun 04, 2005 (Houston Chronicle - Knight Ridder/Tribune Business
News via COMTEX) -- An obscure Houston oil company cleaned up in the bidding for
some potentially lucrative blocks off Nigeria and So Tom and Prncipe.
ERHC Energy has been awarded equity stakes in five different blocks in West
Africa's oil-rich Gulf of Guinea, in waters believed to hold more than 11
billion barrels of crude.
"ERHC is now in league with the big boys," said Phil Nugent, an ERHC investor.
But the bidding process run by Nigeria and So Tom and Prncipe's Joint
Development Authority has been mired in controversy, helping to spark a
political crisis in the tiny, turbulent nation.
Whether this latest uproar could spoil years of groundwork and wreck ERHC's
hopes of exploring off the coast of So Tom and Prncipe remains to be seen.
ERHC, controlled by a wealthy Nigerian businessman, began talks with So Tom and
Prncipe's government about a possible oil deal long before other companies would
give the twin-island nation a second glance.
Those roller-coaster negotiations were marked by corruption accusations,
international arbitration and threats of arrest. But eventually the outfit with
no experience in the offshore was granted preferential rights in the offshore
acreage of the two countries' joint development zone.
Realizing ERHC could open the door to waters where they might make a blockbuster
discovery, U.S. independents Devon Energy Corp., Pioneer Natural Resources and
Houston's Noble Energy Corp. agreed to team up with the virtual unknown.
And this week, a Devon-Pioneer-ERHC consortium won a 65 percent stake and was
named operator of the development zone's Block 2, while a Noble-ERHC alliance
was awarded rights to explore the much-sought-after Block 4.
Devon, Pioneer and ERHC also will be minority partners in a block operated by
Houston-based Anadarko Petroleum Corp., while ERHC will enjoy stakes in two
other blocks.
Like ERHC, super-major Exxon Mobil Corp. had preferential rights to claim stakes
in two of the offshore blocks. But the Irving-based company decided not to
exercise those rights.
The bid results were controversial because the winners weren't always the
parties that had initially agreed to pay the highest upfront payments, known as
"signature bonuses."
Anadarko, for instance, had agreed to pay a $90 million signature bonus for the
rights to explore for Block 4, while Noble-ERHC had agreed to pay only $57
million, International Oil Daily reported. The Noble-led group was then asked to
submit a new bid to match Anadarko's proposal.
Likewise, the Devon-led group was asked to submit a new bid to match a higher
bonus offered by an Indian oil company, Oil Daily reported.
A statement from the Joint Development Authority announcing the winners, said
the winning signature bonus for Block 4 was $90 million and the winning bonus
for Block 2 was $71 million.
Officials from Devon and Anadarko declined to comment. A spokesman for Noble
could not be reached for immediate comment.
Stung by accusations of corruption, the Joint Development Authority issued a
statement, noting: "Other details pertaining to the commercial and technical
aspects, including the work program, were given due consideration during the
exhaustive bid evaluation process."
On Thursday, So Tom and Prncipe's prime minister, Damiao Vaz de Almeida,
abruptly resigned, accusing the government of signing deals with companies "of
doubtful credibility and inadequate technical ability," the Associated Press
reported.
By David Ivanovich
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Copyright (c) 2005, Houston Chronicle
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