Licenses for Gulf of Guinea oil blocs
By
Apr 25, 2003, 13:42

The long-awaited award of oil blocs in the Gulf of Guinea got underway on 22 April 2003, making the venture between Nigeria and the Democratic Republic of Sao Tome and Principe a reality. The blocs, labelled 01 – 09, have oil reserves estimated at six billion barrels.

Licenses were awarded in Abuja for nine deep offshore blocs managed by both countries under the Joint Development Zone (JDZ) agreement. The blocs are within 150 kilometres of the Gulf area. Four types of licenses are available: Exploration License, Oil Prospecting License, Oil Mining License and Production Sharing Contract.

The award of licenses came as a relief since the JDZ agreement was on the verge of collapsing when disagreements led to bidding cancellations last year. At the heart of the crisis, the Government of Sao Tome and Principe threatened to pull out of the Treaty because it had reservations about the role of a Nigerian company, Environmental Remediation Holding Corporation (ERHC). Sao Tome and Principe also cited inequity in the manner in which Nigeria could choose which oil blocs to exploit.

Both Nigeria and Sao Tome and Principe are to abide by specific petroleum and fiscal regulations as stipulated in the award of licenses, which involve the payment of acceptance and other fees, and the registration or incorporation of participating companies from both countries.

Each oil bloc is being offered for a minimum price of $30million. The blocs will be opened for six months, between 22 April and 8 October 2003, during which prospective companies will pay an application fee of $15,000 and a processing fee of $10,000. A tax rate of 50 percent will also be paid, along with a sliding royalty rate based on daily production. Operators will pay $200 per square kilometre during the first 10 years of the Oil Mining License, and another $2000 per square kilometre thereafter.

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

The JDZ covers a total area of about 28,000 square kilometres where 11 oil blocs have already been carved out.

The Gulf of Guinea is considered one of the most productive oil and gas regions in the world.


Related Article: Oil and the Gulf of Guinea


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