Who Should Benefit from Natural Resource Values?
São Tomé Bracing for Oil Revenue Windfall
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A nation has a big opportunity to assist all its citizens, or to fall into bribery and corruption. Will justice prevail?
This item is being circulated by Transparency International and originally appeared in the Financial Times. |
by William Wallis in Nairobi and Michael Peel in Lagos
São Tomé and Principe, one of Africa's smallest and poorest countries, is poised to reap a windfall of up to $200m (€171m, £118m) -- 50 times its annual average export earnings -- officials said as the former Portuguese colony joined the ranks of the continent's oil powers.More than 20 companies have made bids for oil concessions in the Nigeria-São Tomé Joint Development Zone (JDZ), an area in the Gulf of Guinea jointly administered by the two countries along their maritime boundary.
On Monday, officials disclosed that ChevronTexaco, the US oil company with substantial interests in Angola and Nigeria, topped the list with a bid of $123 million for one block. Other US, Nigerian, Australian and European companies are reported to have bid a further $400 million for rights in the JDZ, while ExxonMobil may also join the fray.
According to the terms of the agreement establishing the JDZ, São Tomé is entitled to 40 per cent of the total raised by the licensing round. Nigeria will receive the other 60 per cent.
Officials caution that the bids must now be evaluated, including the technical capacity and financial health of some of the smaller companies in the running. But the level of interest has been above expectations.
"This will change the face of our country and transform our economy," said Patrice Trovoada, special adviser on oil to Fradique de Menezes, São Tomé's president. São Tomé has a population of only 150,000 and GDP of $50 million in 2002.
"Even with repairing infrastructure and promoting development, we cannot absorb the revenue oil is likely to deliver. We will have to establish trust funds and develop mechanisms for asset management."
Officials hope to announce successful bids by the end of the year and agree to contractual terms before mid-2004.
It could be at least another five years before oil is actually produced. But the prospect of new wealth has already heightened instability in the island state, where there have been frequent changes of government in recent years and concerns about corruption.
The issue surfaced in July, when Mr de Menezes was briefly unseated by a military coup. He was restored as a result of international pressure and signed a deal with the rebels, who demanded a greater say in how the country's earnings from crude oil are spent.
There were also concerns about the transparency of the auction process. Tajudeen Umar, chairman of the joint development authority running the auction, promised that details of signature bonuses, royalties and tax payments would be published.
Nigeria is already participating in the Extractive Industries Transparency Initiative, a British government-sponsored programme aimed at increasing disclosure of the financial terms of deals, and decreasing bribery and corruption between governments and companies in industries such as oil and mining.
The commitments were applauded by campaigners for greater transparency -- but some still question whether Nigeria -- and São Tomé -- have the necessary structures and safeguards in place to protect revenues.
But in São Tomé, Mr Trovoada insisted the government was committed to transparency and was realistic about the challenges ahead. "Today on the streets, everyone is happy, greeting one another," he said. "It's like we've all won the lottery. As for tomorrow, we will have to wait and see."
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