Sao Tome Licensing Round Should Remain Unaffected

The licensing round for nine offshore block in the Sao Tome and Principe and Nigerian joint development zone should continue as scheduled in October despite the recent military coup. "If a solution with the military is found quickly, during this week, there shouldn't be any negative repercussions," said Olegario Tiny, a permanent representative on Sao Tome's Joint Development Agency (JDA) with Nigeria.

The junta that toppled the government in a bloodless coup on July 16 has said the president could be back in power by this week and is holding talks with a team of international mediators, including oil exporters Angola and Nigeria. Coup leaders are demanding the eventual creation of a government that will combat poverty and ensure that Sao Tome's 170,000 people see the benefits of any looming oil boom. But even if negotiations drag out, experts say the auction should be only slightly delayed.

The JDA has set a minimum signature bonus of $30 million for each block and has already signed options for exploration with ExxonMobil and ERHC, a small Houston-based company backed by Nigerian investors. The contracts give them the option of taking varying stakes in many of the blocks after the auction. They would have to pay their part of development costs and in some cases they would be required to pay part of the signature bonus.

JDA officials said they will stand behind the contracts, which were renegotiated last year after the International Monetary Fund said they were unfair to Sao Tome. "I don't think the coup will have a major impact on the licensing round. Government changes have been frequent, but contracts are honored," said Gerhard Seibert, Sao Tome specialist at the Center of African and Asian Studies in Lisbon.

Seismic data suggests the offshore blocks in the Gulf of Guinea could hold between four and 11 billion barrels of reserves at depths of between 1,500 and 2,500 meters.