ExoxnMobil Acquires Stake in Block 1 Offshore Sao Tome

ExxonMobil, Gulf of Guinea
(Click to Enlarge)

ExxonMobil, Gulf of Guinea
(Click to Enlarge)
ExxonMobil will take a 40 percent stake in Block 1 in the Nigeria and Sao Tome and Principe's Joint Development Zone for approximately $49 million, the chairman of the authority managing the acreage distribution said on Friday.

Joint Development Authority chairman Taju Umar told Reuters he expected the much-delayed final allocation of JDZ exploration blocks, thought to hold billions of barrels of oil, to be announced by mid-March.

Twenty oil companies bid last year for nine Gulf of Guinea blocks, to be managed jointly by the two countries and estimated to hold between six and 11 billion barrels of crude oil. The winners were expected to be unveiled in December or January.

But block allocation has been put on hold to allow ExxonMobil, and Nigerian-owned Chrome Energy, to exercise preferential rights over the acreage granted to reflect agreements made before the establishment of the JDZ.

"ExxonMobil has decided to take 40 percent in Block One," Umar said.

ExxonMobil confirmed that it had exercised its right on the block on February 12, but did not comment on the dollar amount paid.

Block 1 was the top pick in the bidding round, with ChevronTexaco offering a $123 million signature bonus for a 100 percent of the license.

Umar said Exxon would pay a pro-rata proportion of the $123 million, or some $49 million, for the 40 percent stake in Block 1.

"They will match that, for 40 percent," he said.

Exxon still has an option to take up to 25 percent stakes in up to two more blocks. Then Chrome Energy, also known as Environmental Remediation Holdings Corp, has to say whether it will exercise options to buy stakes in up to six of the blocks.

The preferential rights deals have been renegotiated several times and have been criticized by rights groups, as well as by other potential investors, who could have to partner with Chrome even though the company has a limited track record in the industry. The Gulf of Guinea, where energy companies have already made several huge deepwater oil discoveries, is set to become an increasingly important source of oil for the United States as it seeks to reduce dependence on the turbulent Middle East.

OPEC member Nigeria is Africa's largest oil producer, while the tiny West African archipelago of Sao Tome and Principe will be the latest entrant into the sector.

Umar said he expected a council of Nigerian and Sao Tome ministers to meet to decide the block allocations in the first week of March, and added that he expected an announcement regarding the allocations to be made in mid-March.

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