ExxonMobil Told To Exercise Its Rights; JDA Sets 'End Of The Month' For Block Awards

The Joint Development Authority of the Nigeria-Sao Tome and Principe Joint Development Authority (JDA) has finally notified ExxonMobil that the time has come to exercise its rights to two 25 percent entitlements in Blocks 2 and 4 of the Joint Development Zone (JDZ).

The long-delayed notification came over the weekend, the Authority said in a brief press release carried by Reuters, and ExxonMobil is expected to respond by the end of the month. It was the first time since a Dec. 31 deadline elapsed that the JDA has offered a date certain for awards, and only its second press release since last November. The JDA announced the signing of a Production Sharing Contract for Block 1 with winning bidders at the beginning of February.

ExxonMobil's director of communuity relations, Len D'eramo, refused to comment beyond Sunday's statement by Susan Reeves to ERHC On The Move, but the company has been roundly criticized for delaying the bidding process and depriving Sao Tome and Principe of much-needed signature bonus fees that could amount to more than $150 million after they are split 40:60 with Nigeria. Reeves had said that a comment could compromise "forward business plans."

The news was greeted by wait-weary ERHC investors with something akin to the relief felt by grain farmers at the end of a drought. It brought closer the ultimate conclusion of the bidding process, in which ERHC is entitled to receive its own preferential rights in six blocks of the JDZ - four of them bonus-free - and the much-awaited formal announcement of awards.

While nothing has confirmed them, rumors and hints persist that ERHC's consortium with Noble Drilling in Block 4 and Devon Energy and Pioneer Natural Resources in Blocks 2 and 3 will be awarded operatorships in at least two of those blocks.

However, ExxonMobil's two choices will determine 25 percent of the allocation of Blocks 2 and 4, so the decision by the multinational giant is fraught with consequences for all bidders who hope to gain operatorships in the second licensing round.

The first licensing round concluded in October with just one of nine blocks on offer being awarded to a consortium of ChevronTexaco, ExxonMobil and Norway's Energy Equity Resources, which is said to be considering a sale of its allocation.
ExxonMobil was said in reports from UpstreamOnline to want to sell its second-round choices to other participants, and has reportedly talked to ERHC and others about acquiring them.

It is unclear what effect the press release and Reuters report will have on the share price when stocks open tomorrow, but if the three-day weekend rule - a formulation by this reporter that says the largest price changes come after a three-day weekend - holds fast, the price could see a rise in the $0.04 to $0.08 range to near the $0.55 mark.

Here is the official press release:

PRESS STATEMENT

TOWARDS THE CONCLUSION OF THE
2004 JDZ LICENSING ROUND

Following consultations between the leaders of the States Parties, the Joint Ministerial Council (JMC) has approved that the Nigeria-São Tomé and Prìncipe Joint Development Authority (JDA) notifies Exxon Mobil to exercise its preferential rights, in the ongoing JDZ Licensing Round.

2. Accordingly, Exxon Mobil was notified over the weekend. It would be recalled that the JMC has revalidated options already exercised by the ERHC following the 2003 Licensing Round.

3. As soon as Exxon Mobil exercises its options, the JMC will be convened to approve the final structure of the award of the blocks put on offer in the 2004 JDZ Licensing Round. This is expected to be done before the end of the month.

4. The recent signing of the PSC for Block 01 and the imminent award of additional blocks will usher in the exploration phase for oil and gas in the JDZ.

Nigeria-São Tomé and Prìncipe
Joint Development Authority
Abuja
21 February 2005

This post was copied from the original ERHC On The Move site at http://erhc.blogspot.com, where it was posted at 3:25pm EST on Monday. That site is updated more frequently.