Nigeria and Sao Tome & Principe Begin Licensing Round

Nigeria and the Democratic Republic of Sao Tome and Principe have begun the licensing round for nine blocks in the Gulf of Guinea, with each block offered for a minimum price of $30 million. The deep offshore blocks labeled 01, 02, 03, 04, 05, 07, 08 and 09 lie within 150 kilometers of the region under the Joint Development Zone (JDZ) managed by the two countries.

Announcing the petroleum regulations and fiscal regime guiding the licensing round in Abuja, the Chairman of the Joint Development Authority (JDA), Alhaji Tajudeen Umar, said the signature bonus (acceptance fee) for the blocks will be payable in one payment. The payment should also be made one month after reaching threshold. Companies wishing to participate in the bidding must be registered or incorporated in any or both of the two countries, he added.

Umar said bids for the blocks are open for six months, until October 18, 2003. Prospective companies will pay an application fee of $15,000 and processing fee of $10,000.

The blocks would be covered by four types of oil licenses in the region, namely Exploration License, Oil Prospecting License (OPL), Oil Mining License (OML) and Production Sharing Contract (PSC).

The fiscal regime guiding operations in the zone included a tax rate of 50 percent and a sliding royalty rate based on daily production. Operators will pay $200 per square kilometer during OPL, $500 per square kilometer during the first 10 years of OML and another $200 per square kilometer thereafter for OML.

Nigeria and Sao Tome are managing the JDZ under a treaty signed in February 2001, which gave Nigeria 60 percent of revenues derived from the zone and Sao Tome 40 percent. The treaty is valid for 45 years and renewable after 30 years.

Speaking at the launch of the licensing round, presidential adviser on Petroleum and Energy, Dr. Rilwanu Lukman, said that the acreage available in the JDZ "is amongst the most prolific in terms of petroleum potential."

Lukman, however, said while the tenders would be open and competitive, companies that showed reasonable amount of local content input would be at an advantage. "Local content will be a major consideration for us. Local content not only in terms of employment but actual activities concerning materials, expertise and execution," said Lukman. "This is just to provoke our partners to be inventive, we will examine the bids on this and the ones that appear to be more on local content will mark higher," he added.

Lukman also hinted that companies might be merged in one block under a farm-in agreement to be decided by the board of the JDA. Minister of State for Foreign Affairs, Hon Dubem Onyia said the event marked another milestone in the relations between Nigeria and the Democratic Republic of Sao Tome and Principe.

The JDZ covers a total area of about 28,000 square kilometers. There are 11 oil blocks already carved out of the zone, nine of them being put on offer with reserves estimated at some six billion barrels.