Essar bags oil block in Nigeria, pays $37m as signature bonus

MUMBAI: Essar Energy Holdings (EEHL), a subsidiary of Essar Global, has bagged a block in Nigeria with estimated oil reserves in excess of 80 million barrels.

Sixteen companies participated in the bidding for 45 blocks on offer. Essar is the only Indian company to be awarded a block in the recently concluded bidding. The block, named block 226, is spread over 1,250 sq km.

Though Essar group sources confirmed the development, they however declined to give any details. “Essar has agreed to pay a signature bonus of $37 million upfront and will also share petroleum profit with the government,” sources told ET. The Nigerian government collects a standard royalty at 18% from the upstream producers.

With the Nigerian block in its bag, Essar has enhanced its overseas portfolio to half-a-dozen blocks including two in Mynamar (one each in offshore and onshore) and three onshore blocks in Madagascar. The company has completed the process of seismic data collection and interpretation in these blocks and drilling is likely to commence by October, 2007.

Surprisingly, many global oil majors stayed away from this round of bidding in Nigeria due to the geopolitical troubles. This is despite the fact that over half-a-dozen major players were given the right of first refusal to participate in Nigeria’s infrastructure development. From India, state-owned ONGC was offered preferential blocks, but it stayed away.