Oil bonanza approaches, but the poor life continues

When oil companies submit their bids for nine offshore blocks on Saturday, the small island state of Sao Tome and Principe will be assured of at least US $100 million in the bank before the first drop of oil is found. That is roughly twice as much as the government of this former Portuguese colony currently receives in revenue each year. Sao Tome has been talked of as the new Kuwait, with oil men predicting that billions of barrels of commercial oil reserves will be found in its deep offshore waters. These adjoin the rich offshore oil provinces of Nigeria and Equatorial Guinea, where production is already under way. So there should be no shortage of multinational firms eager to stump up signature bonuses of at least $30 million per block, just for the chance to drill exploration wells. But for the 170,000 population of the twin-island state, which has traditionally scratched a poor living from cocoa exports, the promised oil bonanza, remains a very distant dream. Per capita income is just $280 per year. That compares to more than $4,000 in nearby Equatorial Guinea, which produces 350,000 barrels of oil per day. In the village of Picão on Principe, the smaller of the two islands, children race down the dirt road on homemade wooden bikes with a pack of skinny mongrels yapping and snapping after them. As a small group of older men and women settle down for a chat in the shade of a tree others are still going about their daily chores. Jobs are scarce on this small island and its 6,000 inhabitants mostly live hand to mouth - if they don't gather food, even on a Sunday, they don't eat. Vast reservoirs of oil may lie under the sea 100 km to the north, but for now the warm Atlantic waters of the Gulf of Guinea offers the islanders nothing more lucrative than fish. One young woman was on her way to the beach to buy a few freshly caught fish for 50 US cents each and resell in the market for 30 cents more. Arminda Correia, one of her neighbours, said she did not believe this routine would change, even when her country started to receive hundreds of millions of dollars of income from its oil. "The people have no power to talk to the government" she says "it is the top political people who look after this. They will forget about us". Her pessimism is understandable. Nearby Equatorial Guinea is enjoying the fastest economic growth in the world as revenues flood in from its oil and gas wells. But statistics show that most of its 500,000 people are as poor and deprived now as they were five years ago. The millions that have rolled in have gone straight into the pockets of President Teodoro Obiang Nguema, his family and friends who control the levers of government. And the regime's freedom from reliance on donor aid means that it can afford to ignore international pressure to account for its spending. There is cautious optimism both locally and internationally that São Tomé's modest size, close-knit community and democratic tradition may prevent the wanton pilfering of revenues seen in Equatorial Guinea and many other developing countries which have rich oilfields. Franklin Barros da Silva, the foreman of one of the last remaining cocoa plantations on Principe, is positive about the future. He points out that his country boasts a democratically elected President and a free and open press. "I trust the government" he said "and everyone will get together and fight if they don't share". Alex Vines, head of the Africa programme at the British think-tank the Royal Institute of International Affairs said São Tomé's government had already shown a responsible attitude towards its new wealth. "They have already published some details of the oil dealings on a website which is auspicious" he pointed out. "The rhetoric is good, but now we have to see some action". A lengthy dispute with Nigeria ended with São Tomé's agreement to share the development of the area where their territorial claims overlapped in 2001. Revenues will be divided 60 / 40 in Nigeria's favour and a Joint Development Authority (JDA) has been established to control development in the zone, with representatives from both countries sitting on the board which is based, significantly, in Abuja. São Tomé has publicly hailed the benefits of being allied with such an established oil giant. But Vines warned that Nigeria's influence may be anything but positive. The country's oil industry is notoriously corrupt and an estimated 10 percent of its oil production is stolen by thieves who break into pipelines to bleed off crude. "The oil industry in Nigeria continues to be opaque" Vines said. "And if those practices come to São Tomé it could damage the chances of seeing transparency and accountability in its emerging oil industry". Vines pointed out that Nigeria played a key role in helping elected Fradique de Menezes regain power a week after he was topped by a coup last July . That may cost São Tomé dear as Menezes is now politically as well as financially indebted to Abuja, he noted. But Carlos Gomes, the Sao Tomean deputy director of the JDA, insisted that Nigeria was unable to exert undue pressure. "What each country does with its share is its own business" he said. "But the JDA is an autonomous organisation and up to the point where the cash is handed out there will be no involvement of either state party". "We are surrounded by bad examples" the former Sao Tome minister said, "and we were determined to make the process transparent and accountable at every stage. That is why we published all the details of the bidding process on our website". However, Gomes was more cautious about the safekeeping of oil revenues once they reach the São Toméan treasury. "We are not like Equatorial Guinea, we are democratic" he insisted "A small but strong government with goodwill can protect the money". But when asked if the government had such goodwill, he hesitated. "I don't know" Gomes said and then paused. "We are very close to the arrival of the first money and I haven’t seen any programme from the government explaining how they will spend it. Say $100 million arrives in March, what are you going to do with it? What sort of projects are you planning? A deep sea port? An airport? Malaria? What? But this is government business and I cannot ask these questions". The Portuguese news agency Lusa reported on Thursday that the Sao Tome parliament had elected a commission to draft legislation to regulate the management of future oil revenues. The full extent of the untapped oil reserves in the nine blocks available in this bidding round remains unknown but, while the dispute with Nigeria dragged out proceedings, the rumour mill gathered pace. Published estimates of recoverable reserves range from eight to 24 billion barrels, but until drilling begins next year no-one will know for certain. Even if São Tomé's oil reserves turn out to be a drop rather than an ocean, the country will receive a share of at least US$30m per block in signature bonuses when the initial contracts are agreed between the government and the successful oil company. Gomes explained that at 1600 GMT on 18 October, the envelopes containing details of bids for the nine blocks on offer will be opened and made public. The JDA will decide on the winners in December. Gomes said he hoped the contracts would be signed "before the end of the first quarter of 2004". From that point, the successful oil companies will have 30 days to hand over the non-refundable signature bonus. Most are likely to offer more than the minimum $30m per block demanded by the JDA.. The US giant ExxonMobil has preferential rights to several of the blocks and is considered to be the forerunner in the licensing round. Its corporate website boasts a "pre-eminent acreage position in the high-potential deepwater province of West Africa." Last March, ExxonMobil and the Norwegian oil services company Petroleum Geo-Services (PGS) were contracted to carry out extensive seismic surveys in the Joint Development Zone. Schlumberger, another oil services giant, is already preparing to service oil companies in São Tomé and expects the first well to be drilled in the second half of next year or early 2005. Back on Principe, some of the 6,000 inhabitants are worried that even if their government shares its new wealth with the people, the second island still won't get its dues. "Principe is forgotten - Sao Tome forgot us" complained Carlos Pinheiro, who works in the tourist industry. "If you compare the two islands you can see that Principe is lost in time," he added. "If someone gets injured at night they may die before morning because there is no hospital. Many people want independence, they are thinking of fighting Sao Tome - it’s that serious".