Lack of Rigs May Delay Nigeria, Sao Tome Drilling

LAGOS Aug 16, 2006 (Dow Jones Newswires)

Drilling activities in oil blocks 2, 3 and 4 in the Joint Development Zone owned by Nigeria and Sao Tome may not get underway until the middle of 2007 because of a shortage of drilling rigs, a person familiar with the situation said Tuesday.

"All the companies are making arrangements to get rig slots," said the source at the Joint Development Authority, which oversees the joint development zone.

The three blocks were among five the JDA awarded in a mini bidding round in 2004. The other two are blocks 5 and 6.

Negotiations between the JDA and the winners of blocks 2, 3, and 4 were concluded early this year, while the winners paid $145.6 million last May for signature bonus for the blocks.

Revenue accruing from resources in the common maritime boundary between Nigeria and its island neighbor Sao Tome and Principe are shared in the ratio of 60:40, in favor of Nigeria.

The blocks are located in deep offshore, in the maritime boundary between Nigeria and its island neighbor.

"Rigs for deep offshore are limited because there is a high demand for them," said the source.

Regarding blocks 5 and 6, the source said the winning companies were making efforts to conclude their joint operating agreements as well as their negotiations with their technical partners.

Chevron JDZ Ltd. and its partners on the block 1 completed exploration on the first exploratory well in the joint development zone last March.

Chevron JDZ Ltd., owned by Chevron Corp. (CVX), has a 51% share in the block, while Esso Exploration and Production Nigeria-Sao Tome Ltd., a unit of Exxon Mobil Corp. (XOM), and Dangote Energy Equity Resources have 40% and 9%, respectively.

Copyright (c) 2006 Dow Jones & Company, Inc.


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