NIGERIA SAO TOME AND PRINCIPE JOINT DEVELOPMENT AUTHORITY __________________________________________

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NIGERIA SAO TOME AND PRINCIPEJOINT DEVELOPMENT
AUTHORITY________________________________________
____________

• KEY PARAMETERS OF THE FISCAL REGIME
• IN THE NIGERIA SAO TOME AND PRINCIPE
• JOIN DEVELOPMENT ZONE
• CARLOS B. GOMES
• DEPUTY DIRECTOR
• MONITORING AND INSPECTION DEPARTMENT

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INTRODUCTION

• Main purpose of this presentation Give an
  insight on the work of the Nigeria São Tomé e
  Príncipe Joint Development Authority.
  
• First Ill briefly give some background
  information that led to the signing of the Treaty
  between Nigeria and São Tomé e Príncipe on the
  Joint Development of all the Resources in the
  JDZ
• Ill then proceed with more detailed information
  on the Applicable Laws in the Zone
  
• Ill conclude the Presentation with some usefull
  information about the current ongoing 2003 JDZ
  Licensing Round and information on key elements
  of the agreements reached on Third Party Interest.

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BACKGROUND

• The Democratic Republic of Sao Tomé Principe
  passed its Official Maritime Claims Law on
  March 1998 and deposited same with the United
  Nations.
• This Law established the limit of STPs maritime
  claim at the median line with Nigeria, Equatorial
  Guinea and Gabon.

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BACKGROUND
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BACKGROUND

• Based on this Law, there was a considerable
  overlap with the maritime boundary as claimed by
  the Republic of Nigeria.
  
• In November 1999, the Heads of State mandated the
  Border Commissions of the two countries to meet
  and agree on a solution for the Maritime boundary
  delimitation.
• After several negotiations a Joint Development
  Zone was agreed by both States and a Treaty
  signed on 21st February 2001.

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THE JOINT DEVELOPMENT ZONE
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KEY PROVISIONS OF THE TREATY

• The Treaty establishes the Joint Development Zone
  (JDZ) in a specific area defined by
  co-ordinates.
  
• The two States to share net proceeds from
  activities in the Zone on a 60/40 basis.
  
• The Treaty is valid for 45 years with possible
  review after 30 years.
  
• There is no renunciation of claims to the Zone by
  either of the States Parties.
  

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KEY PROVISIONS OF THE TREATY (continued)

• The resources of the Zone are to be developed
  jointly through the Joint Development Authority
  (JDA).
  
• JDA reports to a Joint Ministerial Council (JMC)
  which has overall political responsibility over
  the JDZ.
  
• Applicable Laws in the JDZ to be approved by the
  JMC.
  

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KEY PROVISIONS OF THE TREATY (continued)

• THE JOINT MINISTERIAL COUNCIL
• Made up of 2 to 4 Ministers from each country.
• Have overall responsibility for the JDZ.
• Gives directions to the Authority.
• Reviews the operation of the Treaty.
• Reviews Treaty for Amendments.
• Dispute resolution in the Authority.
• Shall meet at least twice a year and as often as
  may be required, alternately in Nigeria and in
  São Tomé e Príncipe.
  
• All decisions of the Council shall be adopted by
  consensus.
  

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KEY PROVISIONS OF THE TREATY (continued)

• THE JOINT DEVELOPMENT AUTHORITY
• The Authority shall have juridical personality in
  international law and under the law of each of
  the States Parties and such legal capacities
  under the law of both States Parties as are
  necessary for the exercise of its powers and the
  performance of its functions.
• In particular, the Authority shall have the
  capacity to contract, to acquire and dispose of
  movable and immovable property and to institute
  and be party to legal proceedings.
• The Authority, subject to directions from the
  Council, shall be responsible for the management
  of activities relating to exploration for and
  exploitation of the resources in the Zone (in
  accordance with the provisions of the Treaty).

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ORGANIZATION CHART OF THE JOINT AUTHORITY
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KEY PARAMETERS OF THE PETROLEUM REGULATIONS 2003

• Petroleum operations in the Joint Development
  Zone are guided by the Petroleum Regulations 2003
  as approved by the Joint Ministerial Council on
  the 4th of April, 2003.
• No Petroleum activity may be undertaken in the
  JDZ except pursuant to and in accordance with the
  Petroleum Regulations 2003.
  
• All acreage in the JDZ is held on behalf of the
  State Parties by the Joint Development
  Authority.
  
• In the JDZ there will be a mixed of licensing and
  PSC regimes.

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KEY PARAMETERS OF THE PETROLEUM REGULATIONS 2003

• Participation in petroleum exploration,
  development and production operations in the zone
  is open to
  
• Any company registered in any or both of the
  States Parties
  
• Any company incorporated in any or both of the
  States Parties

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KEY PARAMETERS OF THE PETROLEUM REGULATIONS 2003

• Termination of the contract can be triggered by
• The contractor upon giving six months written
  notice to the Authority.
  
• The Authority if the contractor does not carry
  out operations as specified by the Regulations
  and does not explain or remedy the grounds of
  revocation upon written notice by the Authority.
• The Authority may revoke or terminate the
  Contract if within 4 years the company fails to
  show verifiable evidence of efforts made to meet
  the required minimum work programme, and/or is
  not conducting operations in a vigorous and
  businesslike manner in accordance with good
  oilfield practice, or has failed to comply either
  with the terms of its license, lease or PSC.

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KEY PARAMETERS OF THE FISCAL REGIME

• A uniform Tax rate of 50 shall be charged
  throughout the JDZ.
  
• A sliding scale royalty rate based on daily
  production will apply.
  

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KEY PARAMETERS OF THE FISCAL REGIME

• Area Rentals shall be charged as follows
• OPL for each sq. km. or part thereof 200
• OML for each sq. km or part thereof
• During the first 10 years of term 50
• Thereafter 200

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KEY PARAMETERS OF THE FISCAL REGIME

• The following fees and charges shall apply
• Application for an OPL (bid package)
  15,000
  
• Processing fee for an OPL application
  10,000
  
• Application for an OML
  1,000,000
  
• Application to assign a stake in an OPL or PSC
  500,000
  
• Application to assign a stake in an OML or PSC
  1,000,000
  
• Application to terminate an OPL , OML or PSC
  100,000
  
• Application for a license to operate a drilling
  rig 100,000
  
• License to operate a drilling rig (annually)
  50,000
  
• Permit to export samples for analysis (per
  well) 10,000
  

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KEY PARAMETERS OF THE PRODUCTION SHARING CONTRACT

• The term of a PSC shall be for twenty eight (28)
  years from the Effective Date, inclusive of eight
  (8) years Exploration period under an OPL and
  twenty (20) years of Development and Production
  Period under an OML.
• CONTRACTOR is authorized to conduct Exploration
  Operations for a period of eight (8) years from
  the Effective Date (Exploration Period) as
  follows
• CONTRACTOR shall commence Operations not later
  than thirty (30) days after the Effective Date.
  
• The eight (8) years Exploration Period shall be
  divided into three separate phases as follows
  
• Phase I -four (4) years from the Effective
  Date.
  
• Phase II -From the end of Phase I until two (2)
  years after the end of Phase I.
  
• Phase III -From the end of Phase II until two
  (2) years after the end of Phase II.
  

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KEY PARAMETERS OF THE PRODUCTION SHARING CONTRACT

• A Signature Bonus shall be payable in one tranche
  and shall be non cost recoverable and non tax
  deductible.
  
• The Production Bonus shall be paid within one
  month upon reaching the stated production
  threshold.
  
• A Minimum Work Obligation of two wells or the
  equivalent of one well worth of 3D seismic data
  and one well. This minimum work obligation may be
  increased for blocks with a significant number of
  prospects.
• Ring Fencing of individual developments for cost
  recovery and profit share and on a PSC basis for
  taxation.
  
• There shall be a Cost Recovery Ceiling of 80.

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KEY PARAMETERS OF THE PRODUCTION SHARING
CONTRACT(cont.)

• Contractors Profit Share, P() will be based on
  an R factor.
  
• R factor will be a function of Investors
  cumulative cost recovery and profit share over
  cumulative capital and operating costs.

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KEY PARAMETERS OF THE PRODUCTION SHARING
CONTRACT(cont)

• The following relinquishment provisions shall
  apply
  
• 25 of the contract area shall be relinquished at
  the end of phase I of the Exploration Period.
  
• A further 25 of the Contract Area shall be
  relinquished at the end of phase III of the
  Exploration Period.
  
• Any excluded area shall revert to the JDA.
• The retained 50 area has to be a single
  continuous unit
  

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JDZ 2003 LICENSING ROUND

• The opening of the JDZ 2003 Licensing Round has
  been announced by JDA on April 22nd , 2003
  
• The Round will remain open for a period of six
  months and will be closed on Friday 18th, October
  2003 at 0500 Oclock pm
  
• All Bids to be delivered to the Head Office of
  the JDA in Abuja or to the Liaison Office in S.
  Tomé e Príncipe
  
• A total of nine (9) Blocks in the Northern part
  of the JDZ, covering a total area of over eight
  thousand (8,000) sq. Km, have been offered for
  tender
• Guidelines containing key directives for
  potential Investors have been published by JDA.
  

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BLOCKS FOR TENDER IN JDZ 2003 LICENSING ROUND
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RESOLUTION OF THIRD PARTY INTERESTS

• All issues pertaining to Third Party Interest
  (ExxonMobil, PGS and ERHC) have been amicably
  resolved
  
• On the nine Blocks offered for tender in the JDZ,
  only a cumulative of 22 have been commited
  
• There is only a maximum of 40 pre-commitment on
  any of the nine (9) Blocks on offer
  
• There is no prior commitment for operatorship in
  any of the Blocks
  
• All remaining interest in the nine (9) Blocks are
  open to the ongoing competitive bidding round.
  

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JDA ROAD SHOW

• JDA will hold Road Shows as follows
• In London June 19 and 20
• In Houston, June 23 and 24.
• All relevant legislation (Petroleum Regulations,
  Tax Regulations and model PSC) will be available,
  as part of the Bid Package, before the Road
  Show
• Data Package can be purchased through appropriate
  seismic company.