The Nigeria-Sao Tome and Principe Joint Development Authority ("JDA") announced on 31st May 2005 that a 15% interest in the highly sought after Block 2 of the Joint Development Zone has been awarded to a consortium comprising Equator, an oil and gas company with exploration interests in the highly prospective waters of the Gulf of Guinea, and ONGC Videsh ("OVL"), the international exploration subsidiary of Oil and Natural Gas Corporation of India ("ONGC"), India's largest energy company.
Based on a 3D seismic survey funded by Petroleum Geo-Services ("PGS") and Equator in 2003, recoverable reserves are estimated at over 1 billion barrels. JDZ Block 2 is adjacent to Nigerian Block OPL 246 which hosts the 800 million barrel Akpo field and another series of discoveries totalling 600 million barrels. A consortium, led by U.S. independents Devon Energy, Pioneer Natural Resources and ERHC Energy Inc., was awarded a 65% interest in JDZ Block 2 and will act as operator.
Under terms of the JDZ joint bidding agreement between Equator and OVL ("the OVL/Equator Venture"), any allocations will be shared on a 60%-OVL and 40%-Equator basis. This results in a net 6% participation in the block for Equator's account. The signing bonus for JDZ Block 2 is US$71 million. Equator's share of the signing bonus is US$4.3 million which will be funded from Equator's existing cash reserves.
Mr. Wade Cherwayko, CEO of Equator stated "We are pleased to be among the small number of companies worldwide to be awarded participation in a block in this highly prospective deep water exploration basin offshore Nigeria and Sao Tome. The allocation further expands Equator's portfolio of high potential exploration acreage in the Gulf of Guinea, the world's premier deep water basin."
The JDZ was created through an agreement between the governments of Nigeria and Sao Tomé and Principe in 2001 whereby revenues derived from the JDZ will be shared 60:40 between these governments respectively. There were 5 blocks (Blocks 2, 3, 4, 5 and 6) on offer in the most recent licensing round, with Block 1 having been signed earlier this year by a consortium which comprised ChevronTexaco, ExxonMobil and Energy Equity Resources, for a signature bonus of US$123 million.
The OVL/Equator Venture had submitted bids for two blocks in the JDZ, namely Block 2 and Block 4. OVL's parent company ONGC has considerable experience in deepwater drilling, and is credited with successfully drilling the second deepest well in the world in water depth of 3008 meter by its drill ship Sagar Vijay, on the east coast of India. ONGC has one of the world's largest deepwater drilling programmes underway in offshore India.