With XOM In, JDZ Awards May Be Next Week, UpstreamOnline Says

JDZ Awards Next Week, UpstreamOnline Says
Barry Morgan, the prize-winning reporter for UpstreamOnline who has covered the Gulf Of Guinea block auctions by the Nigeria-Sao Tome and Principe Joint Development Zone since its inception, reported shortly after midnight GMT that all outstandng issues regarding ExxonMobil's rights in the five blocks of the zone that are now on offer have been resolved, setting the stage for awards next week - and he again indicated that ERHC Energy (OTC BB symbol: ERHE) may be a big winner, perhaps at XOM's expense.

Here is the story from last night's editions of the highly-regarded petroleum industry's insider journal:

The JDZ issue is finally resolved

00:18 GMT

EXXONMOBIL has finally decided where it stands in the Gulf of Guinea licensing round, jointly managed between Nigeria and Sao Tome & Principe, writes Barry Morgan.

The company will likely take up its priority rights to 25% of Block-2 and 25% of Block-4 in the Joint Development Zone (JDZ), as agreed under an international protocol signed before the current licensing round.

After weeks of agonising over whether to pull out following abortive attempts to muscle into an operatorship for Block-4, the company opted to cut its losses and take its due. Meetings will resume with Nigerian authorities on 21 March.

ExxonMobil already exercised its right to 40% of Block-1 under Chevron-Texaco's operatorship but failed to bid on either first or second round blocks, therefore rendering it impotent to stake its claim for a larger role.

Just how ExxonMobil managed to play its hand so badly in this political game is a question many observers are asking, as minnows in league with mid-sized companies look set to win the big prizes. Following months of procrastination, the Abuja-based Joint Development Authority set up to manage natural resources in the zone, finally forced the supermajor to take action.

ExxonMobil is understood to have sought operatorship of its own interests through the backdoor based on its relations with Sao Tome and the clout it wields with the Nigerian government. Yet the municipal and international law governing the JDZ enabled Nigerian petrocrats to stand firm, allowing only those bidding to emerge.

ExxonMobil had until 18 March to make its pitch but is understood to have elected under pressure to put bidding suitors out of their misery ahead of deadline. Equity breakdowns on all blocks, including operating stakes, will still have to be approved by the JDA and ratified by a meeting of the Joint Ministerial Council.

It is envisaged that junior equity positions will be decided for second round offerings (blocks 2, 3, 4, 5, 6) before the end of next week, along with the operators. US minnow ERHC Energy has priority rights to several blocks but also bid for operatorship with US partners Pioneer Natural Resources and Devon Energy (blocks 2 & 3) and Noble Energy (block 4).

Nigeria recently relaxed its rule restricting local independents to 10% of equity in deep-water offerings in this year's round to licence the Exclusive Economic Zone (EEZ), raising the bar to 20%. However, it remains unclear how this would play with the JDZ where the round, governed by international treaty, is close to closing.

Sao Tome also wants to launch its own EEZ round this year, competing with Nigeria.

Morgan has suggested in earlier stories that ERHC may take as many as three operatorships in this round, and that possibility seems to gleam through the klines of today's report.