US embassy cable - 04LAGOS2563

UNCLAS LAGOS 002563 
 
SIPDIS 
 
STATE FOR AF/W 
STATE FOR EB/ESC/IEC/ENR/BLEVINE 
STATE FOR DS/IP/AF 
STATE FOR INR/AA 
STATE PASS DOE FOR DAS JBRODMAN AND CGAY 
STATE PASS TREASURY FOR ASEVERENS AND SRENANDER 
STATE PASS DOC PHUEPER 
STATE PASS TRANSPORTATION MARAD 
STATE PASS USAID FOR GWEYNAND AND SLAWAETZ 
STATE PASS EX-IM FOR JRICHTER 
STATE PASS OPIC FOR CDUFFY 
STATE PASS TDA FOR BTERNET 
 
E.O. 12958: N/A 
TAGS: EPET, EINV, NI, ENERG 
SUBJECT: NIGERIA-SAO TOME JOINT DEVELOPMENT ZONE LICENSING 
ROUND CLOSES 
 
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SUMMARY 
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1. (U)  The Nigeria-Sao Tome and Principe Joint Development 
Zone (JDZ) call for bids for five deep offshore oil blocs 
closed December 15, with 26 firms bidding.  The GON expects 
to announce final results on December 31.  High interest is 
centered on Bloc 4, with Houston-based Environmental 
Remediation Holding Corporation (ERHC), Nigerian firm 
Conoil, and U.S. firm ECL International considered among the 
strongest contenders.  End summary. 
 
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JDZ 2004 Licensing Round Bids 
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2. (U) Last month, the Nigeria-Sao Tome and Principe Joint 
Development Zone (JDZ) opened a call for bids for the award 
of five deep offshore oil blocs in the zone. Bidding in this 
second JDZ licensing round closed December 15. Edmund 
Daukoru, Presidential Adviser on Petroleum and Energy, said 
the awards of oil blocks 2 through 6 would be concluded by 
31 December, 2004, when winners will be announced. (Note: 
The GON awarded rights to develop bloc 1 to a consortium 
involving ChevronTexaco, ExxonMobil and Norway's Equity 
Energy Resources for $123 million in 2003. End note.) 
Overall, 26 oil companies submitted bids for the five oil 
blocks on offer. 
 
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Intense Bidding for Bloc Four 
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3. (U) There is considerable interest in bloc 4, which 
covers 857 sq km, and is considered the most lucrative bloc. 
Leading competitors for block 4 include Houston-based 
Environmental Remediation Holding Corporation (ERHC), now 
50% owned by Nigerian operator Chrome Energy.  (Note: Chrome 
is expected to exercise a preferential right for bloc 4, as 
the company secured working interests in six blocs two years 
ago.  End note.) U.S. firm ECL International offered the 
largest signature bonus of $175 million, and so must be 
considered a leading competitor.  (Note: Signature bonuses 
are one important component in the GON's evaluation of a 
firm's offer.)  However, the spotlight has been on Nigerian 
firm Conoil's offer of a signature bonus of $150 million 
(N20 billion).  This is a ground-breaking offer for an 
indigenous firm, which historically have been small and 
undercapitalized.  The GON is attempting to increase 
national content in the energy sector; awarding bloc 4 to 
Conoil would meet this objective, while still ensuring the 
GON gains a significant signature bonus.  U.S. firm Vintage 
Oil and Gas also bid on Bloc 4, offering a $135 million 
bonus; indigenous oil companies Anardako Petroleum and 
Hercule Oil/Centurion Energy bid $90 million and $81 
million, respectively, in signature bonuses. 
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Bids For Additional Blocs 
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4. (U) Energy Equity Resources, Filtim Huzod Oil and Gas 
Limited, and a consortium composed of Kuwait-based I.C.C. 
and Iranian firm Oil Exploration and Operations Company 
(OEOC)bid for blocks 3, 5 and 6. Signature bonuses offered 
by these companies ranged between $37 million and $45 
million. 
Browne#