More Fallout Over Starcrest/Addax Deal Touches Chukwueke

Tony Chukwueke, the former Chrome executive and close associate of ERHC Energy chairman Sir Emeka Offor, may be at the center of a new firestorm following his ouster as the head of the Petroleum Ministry last week. A report in an industry intelligence journal, Petroleum Africa, says Chukwueke is being seconded to the Dept. of Petroleum Resources, a former berth, to find out why billions of past-due payments due for non-JDZ blocks awarded in 2005 and 2006 have apparently not been made.

At another angle, however, the story appears to be yet another effort by majors working through Petroleum Africa to indict Offor, a Nigerian billionaire who has been decidedly unpopular with ExxonMobil, Chevron and Anadarko ever since he won a substantial cluster of rights concessions in the JDZ in open bidding last winter.

In fact, since the story is unsourced - as was the Barry Morgan story in UpstreamOnline that hinted at the same scandal - it is likely that someone from the majors' back office is peddling the story to a variety of publications. There is no indication that doing so has made the least bit of difference, however.

Here's the latest unsourced hit piece:

Nigeria’s DPR in $2.7 Billion Oil Scandal
© Petroleum Africa. All rights reserved.

http://petroleumafrica.com/read_article.php?NID=2798

Petroleum Africa has learned through inside sources that a scandal is about to break in Nigeria’s petroleum industry in regard to $2.7 billion in oil revenue that has yet to be collected from the 2005/2006 bid rounds.

Apparently a special meeting of high level government officials was called last Friday that included President Olusegun Obasanjo, Petroleum Resources Minister Dr. Edmond Daukoru, and Tony Chukwueke, the former head of the Department of Petroleum Resources (DPR). At the meeting Obasanjo was informed that many of the 2005/2006 bid round winners had not yet made payments for their respective blocks; 25 oil blocks were awarded in the 2005 round and 13 in the 2006 mini bid round.

The shocked president directed high-level officials at the meeting to set up a committee to look into the extent of default, and other problems associated with the bid rounds.

An excited Obasanjo gave both Daukoru and Chukwueke a firm directive to recover the money. “Where is my money, where is my money? You have to pay this money. It was in the budget and people are watching,” a panicked Obasanjo reportedly said.

Last month Chukwueke was re-assigned to the Petroleum Ministry over what was commonly believed to be related to the Starcrest/Addax deal for OPL 291. Earlier speculation had it that Chukwueke was to be reinstated, but at this time it does not appear a full re-instatement to DPR is likely for Chukwueke, but rather a return to the DPR to get the accounts in order, so to speak. He will be working with the Acting Director of DPR, Mrs. Chioma Njoku, while he carries out the President’s directive.

Our source postulated: “Industry watchers are beginning to wonder if Chukwueke’s removal last month from the DPR was solely as a result of the controversial Addax/ Starcrest $35m deal on OPL 291, or it is a case of a Pandora’s Box about to be blown open?”

ERHC And Equator Exploration Offer Press Releases On Block 2

In what many investors criticized as a too-little, too-late, too-cool press release, ERHC Energy finally announced to the media that it has concluded deals in the Nigeria-Sao Tome and Principe Joint Development Zone for Blocks 2, 3 and 4 that are believed to contain reservoirs totaling billions of barrels of oil - not that the company has ever said so.

The release came out 3:27pm ET and had a slight effect on share price at that hour, possibly due in part to the St. Patrick's Day holiday. Between 3:20pm and the close, 211,521 shares were purchased and 273,308 were sold.

The Ask and Bid both rose from $0.896 x $0.90 to a high of $0.90 x $0.91 by 3:31pm, and then began to fall just four minutes after the release came out. The release brought buying of just 23,240 and sales of 65,000 after the Bid downtick to $0.905, up until 3:39pm, when the selling started in earnest and 125,000 shares were sold and just 74,8712 purchased. Notably, compared to Tuesday's 1.5 million unidentifiable shares traded at the margins, today's full-day total was just 10,500. The closing Bid and Ask were $0.89 x $0.893, and 31,371 shares were bought at the Ask, all in the last 10 minutes. Closing volume was a meager 3,309,327 shares.

By the day's end, selling had accelerated from 45.5 percent before the release to 47.4 percent, and Buys had decreased from 54.1 percent of the action before the release to 52.6 percent by the close. In simpler terms, the release sucked some people in for four minutes, and then sellers overwhelmed then, as usual.

At the same time, Equator Exploration, which trades on London's AIM exchange and in contrast to ERHC Energy's stock has nearly quintupled in value since it was issued last year, issued a press release Friday noting that there are believed to be something like a billion barrels of oil in Block 2 alone.

Below are both press releases, with ERHC's following the more complete Equator Exploration one:

Equator Acquires Interest In Block 2 Of Nigeria-São Tomé Joint Development Zone ("JDZ")
March 17, 2006

Highly Prospective Block 2 has one - two billion barrel reserve potential

JDZ Block 2 is adjacent to Nigerian Block OML 130 which hosts the 700 million barrel Akpo discovery and other discoveries with an additional 500 million barrels and several TCF of gas

LONDON, United Kingdom & LAGOS, Nigeria - 17 March 2006 - Equator is pleased to announce that it has together with its co-venturers signed a Production Sharing Contract with the Nigeria/Sao Tomé and Principe Joint Development Authority ("JDA"). A 15% interest in the highly sought after JDZ Block 2 of the Joint Development Zone has been awarded to Equator and its joint bidding partner ONGC Videsh Limited ("OVL").

Based on a 3D seismic survey funded and acquired by Petroleum Geo-Services ("PGS") and Equator in 2003, the block has estimated recoverable reserves of 1 billion barrels. JDZ Block 2 is adjacent to Nigerian Block OML 130 which hosts the 700 million barrel Akpo field and another series of discoveries totalling an additional 500 million barrels and several TCF of gas. Other stakeholders in the block include the consortium of Sinopec, ERHC Energy and Addax Petroleum, who together have 65% with Sinopec acting as operator of the block. In addition, Nigerian firms A & Hatman (10%), MoMo Petroleum (5%) and Foby Engineering (5%) were allocated interests in JDZ Block 2.

Under terms of the JDZ joint bidding agreement between Equator and OVL ("the OVL/Equator Venture"), any allocations will be shared on a 60%-OVL and 40%-Equator basis. This results in a net 6% participation in the block for Equator. The signing bonus for JDZ Block 2 is US$71 million. Equator's share of the signing bonus is US$4.26 million which will be funded from Equator's existing cash reserves.

Mr. Wade Cherwayko, CEO of Equator stated "We are pleased to be among the small number of companies worldwide to be awarded participation in a block in this highly prospective deep water exploration play offshore Nigeria and Sao Tome. The allocation further expands Equator's portfolio of high potential exploration acreage in the Gulf of Guinea, the world's premier deep water basin."

The JDZ was created through an agreement between the governments of Nigeria and Sao Tomé and Principe in 2001 whereby revenues derived from the JDZ will be shared 60:40 between these governments respectively. The JDZ is governed by the JDA who also signed Blocks 3 and 4 this week. Block 3 was allocated to Anadarko (51%) who was designated as operator. Other participants in Block 3 are ERHC, Addax and several Nigerian firms. Block 4 was allocated to a consortium led by ERHC and Addax, who together have 60% and operatorship. The additional equity in Block 4 was allocated to Nigerian firms and Hercules, a company partnered with Canadian-based Centurion Energy. JDZ Block 1 was signed in early 2005 to a consortium which comprised ChevronTexaco, ExxonMobil and Dangote Energy Equity Resources, for a signature bonus of US$123 million. Drilling of the first well in JDZ Block 1 is currently underway.


For further information, contact:
Wade Cherwayko, Chief Executive Officer
020 7235 2555

Philip Dimmock, Chief Operating Officer
020 7235 2555

Bobby Morse / Ben Willey, Buchanan Communications
020 7466 5000


And here's the ERHC release:

ERHC Energy Inc. Announces Production Sharing Contracts in JDZ Blocks 2, 3 and 4
Business Wire News Release

ERHC ENERGY INC

HOUSTON, Mar 17, 2006
Walter Brandhuber, President and CEO, of ERHC Energy Inc. (OTCBB:ERHE) announced today that on March 14, 2006, a subsidiary of the Company entered into a production sharing contract with Addax Petroleum (Nigeria Offshore 2) Limited ("Addax"), several oil and gas companies, and the Nigeria-Sao Tome and Principe Joint Development Authority ("JDA"), to conduct petroleum operations in Block 4 of the Joint Development Zone between Sao Tome & Principe and Nigeria ("JDZ"). Mr. Brandhuber also announced that on March 14, 2006, a subsidiary of the Company entered into a production sharing contract with Addax Petroleum Resources Nigeria Limited ("Addax Sub"), several oil and gas companies, and the JDA, to conduct petroleum operations in Block 3 of the JDZ, and on March 15, 2006, a subsidiary of the Company entered into a production sharing contract with Sinopec International Petroleum Exploration and Production Corporation Nigeria ("Sinopec"), Addax Energy Nigeria Limited ("Addax Ltd."), several oil and gas companies, and the JDA, to conduct petroleum operations in Block 2 of the JDZ. Addax, Addax Sub, Sinopec and Addax Ltd. are required to pay all of the Company's future costs in respect of all future petroleum operations in Blocks 2, 3 and 4 of the JDZ. They are entitled to the Company's share of cost oil until they recover the Company's costs.

The Company's CEO Walter C. Brandhuber commented by saying, "The entering into production sharing contracts in Blocks 2, 3 and 4 of the JDZ represents an important step in our goal of commercializing the Company's interests in the JDZ and increasing shareholder value. The Companies' interests in the JDZ blocks represent the cornerstone for the Company's future growth strategy."

In November 2005, the Company entered into a participation agreement with Addax with respect to Block 4 of the JDZ where Addax paid the Company $1.35 million, and will be required to pay an additional $16.65 million on or before March 24, 2006. In February 2006, The Company entered into a participation agreement with Addax Sub with respect to Block 3 where Addax Sub paid the Company $500,000, and will be required to pay an additional $7 million on or before March 24, 2006. Further, on March 2, 2006, the Company entered into a participation agreement with Sinopec and Addax Ltd. with respect to Block 2 where Sinopec will pay the Company $13.6 million on or before March 25, 2006, and Addax Ltd. will pay the Company $6.8 million on or
before March 25, 2006.

The JDZ lies approximately 200 km. offshore Nigeria and is adjacent to areas offshore Nigeria where several large petroleum discoveries have been made. The JDZ was established in 2001 following ratification of a formal bilateral treaty between Nigeria and Sao Tome and Principe. The JDZ is administered by the Joint Development Authority.

Safe Harbor Statement

This press release contains "forward-looking statements," including statements about ERHC Energy Inc.'s future operating milestones, financing plans, as well as other matters that are not historical facts or information. These forward-looking statements are based on management's current assumptions and expectations and involve risks, uncertainties and other important factors, specifically including those relating to the Company's ability to exploit its commercial interests in the JDZ and the exclusive territorial waters of Sao Tome and Principe, that may cause the Company's actual results to be materially different from any future results expressed or implied by such forward-looking statements. The Company undertakes no
obligation to update or revise any such forward-looking statements, whether as a result of new information, future events or otherwise, nor is there any assurance that the contemplated financing will be effected, Page 1 under the terms set forth herein or any other terms.

SOURCE: ERHC Energy Inc.
ERHC Energy Inc., Houston
Jane Barker, 713-626-4700

ExxonMobil Bankers Prod Nigeria On "Security"

A bevy of bankers flew into Abuja last week and met Thursday with President Olusegun Obasanjo to prod Nigeria into revisiting a commitment to Chinese and Korean firms that have promised to build petroleum infrastructure the multinational giant backed out of building after losing a belated bid for ownership of the coveted Block 4 in the Nigeria-Sao Tome and Principe Joint Development Zone.

ERHC On The Move could not access ThisDay Online between 1am and 2am EST this morning and so did not see the article earlier. It was posted to Investor's Hub by Homeport on the ERHE message board.

The XOM bid, part of a late-arriving package from Anadarko Petroleum, lost to a consortium led by Noble Energy. Addax Petroleum has since replaced Noble in the operatorship consortium in which ERHC is a significant partner.

While the JDZ and Block 4 are not mentioned in the article asnd the majors have had substantial physical security issues at the onshore facilities in Nigeria, the subtext of the visit was clearly concern about XOM's loss of a hugely valuable entitlement to two 25-percent choices in any of the last five blocks on offer in Round 2 of the JDZ licensing regime.

The oil giant has been unable to move the Nigerian government on Block 4 and apparently sent the bankers to plead its case under the aegis of Total, a sometimes partner.

It appears that their aegis lost, however. It is not known to what extent President Obasanjo may have capitulated, but he has not been pleased with XOM's performance on a number of promises over the past decade.

Here is the article outlining the meeting with more two dozen powerful U.S.- and European banks by Mike Oduniyi, a veteran reporter on his nation's oil business, in ThisDay Online:

Foreign Investors Express Concern over Security
By Mike Oduniyi, 11.21.2005

Foreign investors who have committed huge funds into the country’s oil and gas sector have expressed concern over the growing fears of insecurity in the country and its implication on their investments.

THISDAY gathered that about 24 top flight financial analysts, representing the world’s major investors from countries including the United States, Britain, France, Belgium and Switzerland, were in the country last week and held talks with the Federal Government.

The analysts represented major investment companies who are big lenders to many Nigerian mega oil and gas projects, namely Merrill Lynch, Societe Generale, Bank of America Securities, Credit Suisse First Boston, Morgan Stanley, UBS Investments, Goldman Sachs, J.P. Morgan and Management, and Lehman Brothers.

An official close to the meetings, held with President Olusegun Obasanjo and other senior government officials Thursday in Abuja, disclosed that the investors expressed deep concerns bordering on the safety of their investments already committed into oil and gas projects including the Liquefied Natural Gas (LNG), the Natural Gas Liquids (NGL), the Amenam/Kpono offshore oil field development and the Akpo deep offshore project.

“The investors principally came to evaluate what has been happening to their investments, if they are safe, and also to get the needed assurance to see if they will put more money in future projects in Nigeria. They needed assurance of a stable polity.

“For instance, they have been following the Nigerian government’s pronouncements on full commercialisation of the country’s huge gas resources and also raising oil reserves to 40 billion barrels by 2010. They said that they are worried about the crises in the Niger Delta,” the official added.

Credit Suisse First Boston (CSFB), for instance, signed an agreement with the Nigerian NNPC/ExxonMobil joint venture last year, to lead a consortium of Nigerian banks in raising about $1 billion for the second phase of the Oso Natural Gas Liquids (NGL).

Most of the investors are also on standby to provide funding for the NLNG trains 7 and 8, the Amenam/Kpono gas gathering project, as well as the Usan deepwater project.
A statement from French oil firm, Total, weekend said that it played host to the investors who also visited the Amenam/Kpono oil field, which is contributing 125,000 barrels per day to Nigeria’s total oil production, and the Nigerian Liquefied Natural Gas (NLNG) plant at Bonny, Rivers State.

“The financial analysts had gone to see President Obasanjo in the company of Total’s Chief Financial Officer, Robert Castaigne; President, Exploration and Production Christophe de Margerie; Senior Vice President Africa, Exploration and Production in Africa, Jean Privey; Managing Director of Elf Petroleum Nigeria Limited, Jacques Marraud des Grottes and other top company executives,” the statement reads.
The Total statement quoted Obasanjo as saying that his administration was committed to the enthronement of transparency and accountability in the oil and gas industry, as part of its anti-corruption campaign.

Obasanjo also said his government had pursued the policy of monetisation of gas instead of flaring it, expanded the country’s oil and gas reserves and increased production capacity.

The statement said further that the Minister of State for Petroleum, Dr. Edmund Daukoru who also hosted the investors also assured on the government’s preparedness to provide security in the Niger Delta.

He said that the Federal Government has adopted strategies to expand the playing field and encourage more investors in the oil sector.

Meanwhile, Daukoru, in another statement weekend stated that the Federal Government was not about to review the memorandum of understanding it entered into with the China National Petroleum Company (CNPCO) and Korea National Oil Company (KNOC).

The Nigerian government had come under pressure from oil majors over the grant of preferential rights to CNPCO and KNOC in the recent awards of oil blocks. The two Asian firms had pledged to undertake downstream projects in Nigeria.

“We wish to state for the records, that at an early stage in this process, some of the majors had offered consultancy services only, which Government found inadequate to address the necessity for a fully committed core investor.”

“We would also like to make it clear, that should there be a review of this strategic understanding with the Chinese and Korean Oil Companies, all interested parties would be made aware of such an outcome in line with Government’s commitment to openness and transparency in all its activities in the oil and gas sector,” it added.

Addax Rejected As ERHE Partner, Platts Says; Addax CEO Says Deal Still On

Addax Petroleum has been rejected as a partner to replace Noble Energy in the Noble/ERHC Consortium, according to an unnamed source who spoke to the Platts intelligence service, removing the final obstacle to Anadarko - probably in a tie-up with ExxonMobil, whom it earlier tried to bring into its bid after bids were sealed - to get operatorship of the much-disputed Block 4 in the Nigeria-Sao Tome and Principe Joint Development Zone.

The rejection was disputed by an Addaz executive in his statements to Platts, which broke the story, and is the latest in a series of hard blows against ERHC Energy, which has rights guaranteed by treaty in all five of the blocks offered in the 2004 Licensing Round.

Anadarko's chief of governmental relations, whose wife is general counsel of the Senate Committee on Energy, has apparently used a $300 million debt reduction plan proposed by the World Bank to persuade the tiny nation-state of Sap Tome to probe the award of Block 4. The first casualty of the probe was Noble Energy, and Addax is lined up to be the second.

The probe is headed by an R. Dobie Langenkamp, a two-time Dept. of Energy official and an old college classmate of the couple, Greg and Judy Pensabene.

The latest sign of trouble came Monday, when the Joint Development Aithority, which administers the JDZ under the direction of a joint ministerial council with representatives from both nations, removed a press release saying it had accepted a Memorandum of Understanding between Addax and ERHC under which Addax would replace Noble.

It then removed two "timeline" documents, each of which carried a different timeline for the same events.

Then ThisDay Online revealed that Hallmark Bank, whose CEO is under arrest, had been unable to produce the Block 1 signature bonus paid to Nigeria, some $58 million.

Behind these machinations are the powerful oil companies that control the National Energy-Environment Law and Policy Institute (NELPI) at the University of Tulse College of Law.

The NELPI advisory board and executive committee are heavily peopled by ExxonMobil and Anadarko executives, with six Exxon and four Anadarko attorneys currently serving.

The Pratt's "leak" of the JDA developments may be authentic information, but there is a good chance that the information is designed to further disrupt the awards process and stop the Joint Devel;opment Authority from completing the awards process and obtaining some $400 million in signature bonus fees.

Anadarko offered $90 million for operatorship of Block 4, where it tried to bring in ExxonMobil as a joint venture partner but was rebuffed. The JDA found the slow-go drilling schedule of Anadarko unacceptable, and gave the block to ERHC/Boble Energy on condition that they pay the same fee and mount a much more vigorous effort, requiring them to drill three wells in four years.

Then Langenkamp went and took control of the Sao Tome probe, contradicting the Atty. Ge. of Sao Tome, the ostensible person in charge when reporters asked if there was any evidence of wrongdoing. The attorney general said there was not, but Langenkamp said there had to be an investigation. The Sao Tome government was powerless to stop it as virtually all the principals in the Sao Tome government are potential subjects of the probe.

Then President Olusegun Obasanjo's wife was apprently murdered at a plastic surgery clinic in Spaon and a plane with key fraud investigators was brought down in Nigeria, both on the same day; neither bodies nor the black box and cockpit voice recorder from the plane were recovered. Those events have apparently moved President Obasanjo to make peace with ExxonMobil, which has been quietly warring with his anti-corruption government, and developments in the JDA followed soon thereafter.

Most Nigerina and all American news organizations have shied away from the huge changes going on as majors and minnows fight over 32.5 billion barrels ofoil said to be waiting in the tranquil waters of Block 4. The JDZ's nuine blocks may contain a total of 14 billion barrels of oil, according to the Houston Chronicle.

Here is the limited account of these events from Platt's,psted on Raging Bull:

Posted by: ztock (the poster is a well-known ERHC "basher")
In reply to: None Date:11/9/2005 10:55:58 PM
Post #of 13145

JDA rejects Addax replacement of Noble - source.
8 November 2005
11:03 AM

Platts Commodity News
English
Copyright 2005. Platts. All Rights Reserved.

Cape Town (Platts)-8Nov2005/1058 am EST/1558 GMT The Abuja-based Nigeria-Sao Tome Joint Development Authority managing a deepwater licensing round in the Gulf of Guinea has rejected Addax Petroleum's bid to replace Noble Energy as Houston-based ERHC's partner and operator in Block 4, an industry source told Platts Tuesday.

Addax Petroleum managing director Jim Pearce said he had "heard something about that," and would know more later in the day. A spokesman for Addax said he was unaware of the decision, while the JDA's spokesman said he had not yet seen "anything official." The JDA accepted a Memorandum of Understanding signed by Addax Oct 25 to replace Noble as a partner in the block, subject to certain conditions, including the consortium's commitment to pay its $90-mil signature bonus and to drill three wells during the first exploration phase of four years.

Pearce Monday said the JDA had "officially approved" its replacement in
the Block 4 consortium but that details were still being worked out.

"At this point of time we just have a memorandum of understanding between
ourselves and ERHC. But we do have official approval from the JDA to replace Noble as operator," Pearce told Platts on the sidelines of a Global Pacific oil and gas conference in Cape Town. ERHC, which enjoys preferential rights without the obligation to pay any part of the signature bonus, was awarded a 60% equity stake and operatorship of Block 4 with Noble in May. The other partners, Nigeria's Conoil (20%), the pairing of Nigeria's Hercules and Overt (10%), Centurian and Addax (5)% and Nigerian minnow Godsonic Oil and Gas (5%), agreed to pay a signature bonus of $90-mil for the block.

The JDA last awarded five blocks in June last year after several delays
due to wrangling and accusations of corruption between the countries.
The JDA has since been criticized for stalling talks on production
sharing contracts for Blocks 2, 3, 4, 5 and 6 in a second licensing but last week said the PSCs would be signed off before the end of the year.

Addax Petroleum, which is strongly focused on Africa and whose principal upstream operations are in Nigeria, expects to raise its production from 80,000 b/d to 100,000 b/d by mid 2006, Pearce said. Proven and probable reserves of Okwori, which it acquired in 1998 after Ashland pulled out of Nigeria, are estimated at between 69-to -186-mil bbl, while operating costs have dropped from $12/bbl to $5.4/bbl in 2003, he said. The company's CEO Jan Evert Mulder, who was scheduled to give a speech at the Cape Town conference on Thursday, quit his position last week.

NIGERIA ARRESTS HALLMARK BANK BOSS Nigeria's Economic and Financial Crimes Commission last week arrested Hallmark Bank's chairman and chief executive, Marc Wabara, in connection with $58-mil in funds belonging to the Joint Development Zone, Nigeria's ThisDay newspaper reported Monday. Hallmark Bank has been shut down by Nigeria's central bank. "The money, Thisday gathered, was placed in fixed deposit account with Hallmark Bank by JDZ but could not be produced on demand," it said.

Officials at Hallmark Bank, a founding member of the First Consolidated Bank, confirmed that Wabara was being quizzed for what they described as "some operational issues," the newspaper said. The twin-island state of Sao Tome and Principe, which has a population of about 170,000, signed an agreement with Nigeria in 2001 to split the revenue from any oil found in their shared offshore waters.

-Jacinta Moran, jacinta - moran@platts.com.

Forbes Warns Oil Bubble Will Burst Soon

Steve Forbes, thepublisher of Forbes magazine and operator of Forbes.com, said today in an interview that the price of oil will burst suddenly and fall to the $35 level by early next year. The Forbes.com site has generally been bearish on ERHC Energy (OTC symbol: ERHE).

Here is the article:

Oil price bubble about to burst — Forbes

SYDNEY, Aug. 30 (AFP) — Oil prices are set to crash from this week’s record highs as a speculative market bubble bursts with an impact that could make the hi-tech bust of 2000 "look like a picnic," business publisher Steve Forbes predicted Tuesday.


Forbes said the high oil prices currently dampening the US economy, which peaked at more than $70 a barrel Monday as Hurricane Katrina headed for the US Gulf Coast, would fall to $30 to $35 a barrel within a year.

"I’ll make a bold prediction... in 12 months, you’re going to see oil down to $35 to $40 a barrel," he told reporters in Sydney.

"It’s a huge bubble, I don’t know what’s going to pop it but eventually it will pop — you cannot go against supply and demand, you cannot go against the fundamentals forever."

The billionaire magazine publisher’s comments came as the price of crude eased following US government comments that it could release some of its Strategic Petroleum Reserve (SPR).

The SPR, a 700 million barrel stockpile set aside for emergency use, could be used to counter oil shortages caused by Hurricane Katrina’s devastation of the Gulf oil industry, which accounts for about a quarter of US output.

Forbes, who unsuccessfully sought Republican nomination in the 1996 and 2000 US Presidential elections, said the US government’s constant topping up of the SPR had helped drive up oil prices.

"The speculators know now that no matter what happens to the price of oil, Uncle Sam is there buying almost every day," he said.

"Stop the buying and in fact throw some of that oil on the open market, boy that would throw it in turmoil and send the price down."

He said factors such as inflation and increased demand for oil from China and India only accounted for a small part of the price hike from $25 to $30 a barrel three years ago.

"The rest of it is sheer bubble speculation," Forbes said.

"I’ll be blunt, there’s hardly a hedge fund in North America that hasn’t speculated on oil futures."

Forbes said the higher the oil price rose, the harder it would eventually crash, creating more pain for hedge find managers and their clients.

"I don’t think it’s going to go to $100 but if it does the crash is going to be even more spectacular," he said. "It will make the hitech bubble look like a picnic — this thing is not going to last."

Economists said the damage caused by Hurricane Katrina could lead to higher oil prices in the short term.

"The key factor is really going to be how much damage has been done to oil production facilities, how long the higher prices are going to be sustained," National Australia Bank minerals and energy economist Gerard Burg said.

"That, at the moment, is the big unknown because really it’s far too early to know what has been done to the oil rigs.

"But if there’s any sustained damage then obviously prices are going to be supported higher in the short-term."

Trading Updates: ERHC Is In Deep Waters

Ignored as the price of oil soared, ERHC Energy is now watching its share price fall with the price of oil on news that the OPEC quota will be expanded for a second time this month, this time by 1,1 million barrels of crude per day.

For ERHC On The Move our portfolio of 120,000 shares purchased at an average of $0.4374 that a month ago was enjoying a $50,000 gain is now not enjoying a $1,300 loss.

Update, 8:51am EDT, 6/30/05: After closing at $0.45 on Tuesday, the share price closed at $0.445 on Wednesday and opens at that price today. The Bid is $0.445 and the Ask $0.45.

Update, 10:44am EDT, 6/29/05: The price is now $0.43, the Bid, on 400,349 shares of volume. The Ask is $0.435. Pumpers on Raging Bull are so depressed they're jumping off exclamation points.

Tempest In Teapot Obscures Great News: ERHC Wins JDZ Blocks 2 And 4

A report dated April but released tonight by Menas Associates, an energy consulting firm with a keen interest in Africa, concurs with other sources of ERHC On The Move that Blocks 2 and 4 of the Niogeria-Sao Tome and Principe Joint Development Zone have been awarded to ERHC Energy and its partners Pioneer Natural Resources and Devon Energy in Block 2 and ERGC and Noble Energy in Block 4, with the much sought-after Block 3 going to Anadarko Petroleum Corp. of Oklahoma City.

That news may counteract the selloff momentum of yesterday afternoon. Between 3:57:02 and 16:01:20, 129,.350 shares were sold in 33 trades against 17,000 buys in just eight trades in the same period, dropping the price two cents to a recent low of $0.65. Some 45,000 of those shares were traded after-hours in Form T sales.

However, indicating that despite the $0.065 drop that buyers still have momentum, at the end of the day in 313 trades there were 662,654 shares purchased and 625,648 sold, with 27,700 unidentified. The sharp drop came on low volume and a small number of trades, many of which were Form T sales that must be explained to the SEC.

The sales accompanied the release on the ERHE Raging Bull message board of two poorly-translated and controversial Portuguese-language articles in which opposition members of an ad hoc committee of the Sao Tome and Principe parliament vowed to delay the awards for a technical review. Neither of these Websites have been friendly to the de Menezes government of late, so while the committee was identified in the headline as "Parliament," in fact it was a one-sided committee of opposition party members who took no binding vote on any of the issues, and did not have the authority to do so.

Here is the key article from Tela Non, a Sao Tome Website, with the headline and three relevant paragraphs (in boldface) translated by me:

Parlamento conclui que há erros graves no processo petrolífero

Parliament finds grave errors in petroleum process

Agudiza-se a polémica à volta da última reunião do conselho ministerial conjunto nigeriano-são-tomense. Depois de confrontar o ministro dos Recursos Naturais que presidiu a delegação nas negociações com a parte são-tomense na Autoridade Conjunta (JDA), o Parlamento concluiu estarem a haver erros graves de procedimento.

A comissão especializada da Assembleia Nacional para Assuntos do Petróleo reuniu as duas partes para clarificar alguns aspectos sobre como decorreram as negociações em Abuja, Nigéria, relativamente a adjudicação de blocos petrolíferos, uma vez que já ontem, os representantes do arquipélago na JDA, afirmaram perante os deputados que o país engajou-se nesta última reunião ao assinar um termo de compromisso.

Após três horas de confrontação, o Parlamento concluiu que ainda não há um acordo definitivo entre os dois países, mas que estão a haver erros graves de procedimento.

After more than three hours of discussion, the Parliament concluded that there is as yet no definitive agreement between the two countries, especially that has so many grave procedural errors.

“É que tem havido erros graves de procedimento que de alguma forma afectam os interesses de São Tomé e Príncipe. Nós não estamos a dirigir este dossier com o rigor necessário para defender os nossos interesses”, afirmou Carlos Neves, Presidente da Comissão do Parlamento para Assuntos do Petróleo.

Uma das questões que mais preocupa o Parlamento é o facto de a empresa nigeriana ERHC possuir direitos de preferência sobre alguns blocos petrolíferos.

One of the questions that most worries Parliament is the fact that the Nigerian firm ERHC possesses preferential rights over some oil blocks.

“Os blocos variam em termos de valor monetário, ao deixar a ERHC poder escolher os blocos sem que nós próprios conheçamos o valor dos blocos podemos ser afectados nessa escolha”, referiu Carlos Neves.

The blocks vary in terms of monetary value; ERHC had the power to choose those that are known to be of the most value to us without giving us any choice in the matter," Carlos Neves said.

E porque existem pessoas que são sócias de companhias petrolíferas ao mesmo tempo que em nome do estado são-tomense negoceiam a adjudicação de blocos, contrariamente ao disposto na lei quadro das receitas do petróleo, o parlamento apela aos órgãos competentes para afastarem essas figuras das negociações.

And because there are persons who are trusted associates of the oil companies and at the same time in the name of Sao Tome are negotiating the allotment of the blocks, contrary to the image created by the recent [transparency] law on petroleum, the Parliament appeals to competent agencies to get away from these dollar figures they have negotiated.

Após ter ouvido todas as partes implicadas, o parlamento pediu um parecer técnico à Agência Nacional do Petróleo para saber se os interesses são-tomense estão ou não a ser lesados antes de tomar uma posição definita.

Here is the second article (I've translated four of the paragraphs, in boldface) from Vitrina, which offered more of the same:

COMISSÃO PARLAMENTAR DETECTA ERROS NO SEGUNDO LEILÃO

PARLIAMENT FINDS ERRORS IN SECOND AUCTION ROUND
by José Bouças
05.05.2005-J.Vitrina

SAO TOME - O processo do segundo leilão na zona de exploração conjunta entre S.Tomé e Príncipe e a Nigéria está a ser pouco transparente segundo a comissão parlamentar para os assuntos petrolíferos. A comissão reuniu-se hoje com os representantes da autoridade conjunta e o governo e chegou a conclusão que existem erros graves no processo.

The process of the second auction of the Joint Development Zone between Sao Tome and Principe and Nigeria was less than transparent, according to a parliamentary committee on petroleum affairs. The committee met [Wednesday] with the representatives of the Joint Development Authority and the government and came to the conclusion that grave errors existed in the process.

Por isso Carlos Neves presidente da comissão disse que recomendou o governo a não assumir nenhuma decisão sem que antes a agência nacional do petróleo apresente o seu relatório sobre a matéria.

Based on that, Carlos Neves, president of the commision, offered a recommendation that the government not make any decision before the national petroleum agency hears issues related to the matter.

A audição surge um dia depois do MLSTP/PSD reagir através de um comunicado as alegadas violações as regras do jogo em vigor para a atribuição de interesses participativos a empresas petrolíferas no segundo leilão realizado na zona de exploração conjunta com a Nigéria.

Para os sociais democratas essas violações a confirmarem-se ferem o princípio da transparência tão necessário para uma correcta gestão dos recurso petrolíferos.

O MLSTP/PSD diz existir provas claras de que algumas individualidades nacionais e estrangeiras com interesses evidentes em algumas empresas que saíram claramente beneficiadas neste leilão, ocupam cargos de importância de estado, ou têm ligações com pessoas do estado que participam em processo de decisão em matéria de petróleo, nomeadamente no conselho nacional de petróleo e comité ministerial conjunto.

The Movement for the Liberation of Sao Tome and Principe and the Social Democratic parties said that there exists clear proof that some Sao Tomese nationals and foreigners that benefited from the auction have roles of importance to the state, or legal ties to important persons in government who participated in the decisions on petroleum matters as members of the national petroleum council and the Joint Ministerial Council.

Por isso os sociais democratas exigem que nenhuma decisão seja aprovada sem que haja um parecer independente de técnicos nacionais ou de uma empresa de reputação internacional que confirme que as decisões propostas pelo conselho ministerial conjunto S.Tomé e Príncipe – Nigéria estão conforme os regulamentos e regras estabelecidas para a correcta organização do segundo leilão.

For that reason, the Social Democrats demanded that no decision be approved until an independent technical advisor or a firm of international reputation has confirmed that the proposed decisions of the Sao Tome and Principe Joint Ministerial Council
are in conformance with the rules and regulations established for the proper organization of the second auction.

Exige ainda o MLSTP/PSD a imediata reposição da legalidade mediante o afastamento das suas actuais funções de todos aqueles indivíduos que comprovadamente possuem interesses directos ou indirectos nas referidas actividades.

O Partido alerta ainda o povo para as tentativas em curso no sentido de um pequeno grupo aproveitar-se indevidamente dos recursos do petróleo em benefício pessoal e em prejuízo do interesse geral dos santomenses.

However, the tide of political power seemed to be against the Sao Tome opposition, as they failed to muster a bipartisan quorum for one critical meeting last Friday, and the current article bears no indication "Parliament" - the ad hoc committee - voted on any finding.

Former U.S. Ambassador to Nigeria Howard Jeter told ERHC On The Move after the close that the articles could not be relied upon without other information. Jeter said it was mentioned to him that awards would be next week, but he cautioned that his information was not at all definitive.

The Menas Associates report, meanwhile, said the proposed allocation of block awards by the Joint Ministerial Council was "delicate and vulnerable" but could well hold fast through the announcement of the block awards next week.

A key to the result was the delicate balance of interests between competing poltical shareholders in Sao Tome, Menas Asociates said. It indicated that shareholders of a number of smaller Nigerian independent firms that had vied for smaller portions of several blocks may have influenced the outcome of the second licensing round, a contention raised by parties out of power in the Parliament of Sao Tome and Principe whose officials are themselves shareholders, the report indicated.

It is the opinion of ERHC On The Move that ExxonMobil is at the root of much of the controversy after having lost its rights by inaction on Blocks 2 and 4 and then reportedly choosing to withdraw from participation in Block 1, which is permitted under the Production Sharing Contract it signed.

The company may get its money back from another bidder frustrated in other blocks, but we believe that in the meantime it has recruited political figures in Sao Tome's parliament - ironically, in the former Communist Party - to act as outraged activists for the benefit of the press that results.

Those activists have largely relied on the participation of Mateus Rita, a former Sao Tomese Secretary of State and foreign minister who resigned last year. Some of the same parliamentary figures raised precisely the same issue when awards seemed imminent in 2003, but at that time a letter acknowledhing Rita's ownership of some ERHC shares was presented by President Fradique de Menezes which met the terms of the treaty of 2003 that had enabled the Joint Development Zone's activation.

That treaty and subsidiary documents prohibit shareholders from participation in some activities without express permission from the government, which Rita had received. Rita resigned from the government last year, making the whole matter moot.

Here is the Menas Associates article, dated April but released late on May 4:

JDZ awards edge towards controversial compromise

Intense negotiations have been taking place in a bid to reach consensus between Nigeria and São Tomé e Principe over the award of five blocks in the Joint Development Zone along their common maritime boundary.

The Joint Ministerial Council, made up of senior officials from the two countries, began meeting to approve the awards on 26 April. The meeting broke up two days later without any formal announcement, amid indications of a complex and potentially controversial compromise.

Some São Tomé officials are understood vigorously to have opposed the proposed allocation of up to 20% in awarded blocks to several indigenous Nigerian companies which either have no experience in oil and gas or were registered at the last moment to participate in the round. These include Momo and Equinox, both believed to be controlled by the same Abuja-based businessman, and Godsonic and Hatman, both linked to a controversial confidant of President Olusegun Obasanjo, ruling People’s Democratic Party heavyweight and former works and housing minister Tony Anenih.

Nigeria is understood to have opposed counter-proposals to award operating rights in block 4 to Anadarko over Noble, its preferred choice. Nigeria was also lukewarm over pressure to increase significantly the stake offered to Indian firm ONGC and its partner Equator. Equator’s chief executive Wade Cherwayko, is associated by some officials in Nigeria with one of his previous companies, Abacan, which collapsed spectacularly and at some cost to its local partner in 1997, after banks lost confidence in much repeated promises of huge returns from investment in the Niger Delta.

It is understood Nigeria and São Tomé reached a compromise on 28 April after three days of talks in Abuja in a deal that allows for the award of all five blocks but includes the participation of new players. The proposed deal requires the approval of the National Petroleum Commission in São Tomé, before formally being signed off by a reconvened meeting of the JMC.

Officials hope to conclude the round and announce awards in time for a visit to Nigeria on 4 May by São Tomé’s President Fradique de Menezes.

Provisionally, it appears operating rights may be awarded as follows:
- block 2: Devon, Pioneer and US-listed, Nigerian-controlled ERHC;
- block 3: Anadarko;
- block 4: Noble, ERHC and an as yet undisclosed party;
- block 5: Iran’s ICC/OEOC;
- block 6: Filtim Huzod, a Nigerian independent with no previous experience in the sector, which has partnered with China’s Sinopec. (Emphasis added.)

Some São Tomé officials are understood to maintain profound reservations about the proposed deal. They have threatened to disclose details of the ownership of some of the indigenous companies with more limited capacity. They have also hinted at disclosure over the methods employed to lobby members of the National Oil Commission in São Tomé, which they say would provoke a profound political crisis in the country.

However, there are counter-allegations that elements of this constituency are also vulnerable to charges of potential conflict of interest, which could prove equally damaging politically, a year ahead of presidential elections in São Tomé. Officials close to the process appear confident that the prospect of any damaging disclosures provoking an equally damaging response is likely to facilitate an uncontentious move towards awards in early May, although the process remains delicate and vulnerable.