Global Policy Forum

By Simon Romero

A coup this week in the West African island nation of Sí£o Tomé and Prí­ncipe is reverberating in the corporate suites of the energy industry here, oil company executives said today. Officials from several companies said they were anxiously monitoring events on the potentially oil-rich archipelago, a former Portuguese colony on the Equator in the Gulf of Guinea.

Exxon Mobil of Irving, Tex., the world's largest oil company, and Chrome Energy, a small Houston-based oil and gas company controlled by Nigerian investors, have secured options for oil exploration in the waters off Sí£o Tomé, an area just south of oil-rich Nigeria that geologists estimate could hold up to six billion barrels of reserves.

ChevronTexaco, Royal Dutch/Shell and TotalFinaElf are among the other big oil companies that have shown interest in bidding for licenses to explore other areas in auctions scheduled for October. This interest has sent expectations soaring in Sí£o Tomé and Prí­ncipe, a two-island country of 1,000 square miles and 160,000 people where the main export crop is cocoa and the average annual income is $280.

"Oil has created dreams of grandeur for a tiny place that has been on the margins of global affairs for many years," said Gerhard Seibert, an authority on Sí£o Tomé at the Institute of Tropical Scientific Investigation in Lisbon. "The army and the political and business elites sense something coming and want a part of it."

American and European companies are not the only potential investors in Sí£o Tomé's nascent oil industry. Nigeria has a treaty with Sí£o Tomé establishing a joint development zone in waters off both countries, allowing 60 percent of the revenue from the area to go to Nigeria. And Sonangol, Angola's state-controlled oil company, has reached a preliminary agreement to train Sí£o Toméan oil officials and invest in future projects.

It remains to be seen how the coup leader, Maj. Fernando Pereira, will treat existing agreements. He agreed to talks today with representatives from the United States, the Community of Portuguese Speaking Countries and Nigeria, in one of the first indications that tensions could ease.

Still, most cabinet members, including the oil minister, Rafael Branco, were being held captive today, adding to uncertainty over the effect the coup may have on oil exploration. The coup has already affected Sí£o Tomé's fragile economy: The World Bank said this week that it would suspend all aid to the nation as long as the coup leaders remained in power.

"Our contracts are with the government of Sí£o Tomé, so we're assuming that they will be honored no matter what takes place," said John Coleman, director of investor relations at Chrome, a publicly traded company whose formal name is Environmental Remediation Holdings Corporation. But, he also said, "It's too early to tell what's going to happen."

Marcia Zilensky, a spokeswoman in Houston for Exxon Mobil, said the company was "closely following the situation like everybody else." Exxon Mobil has yet to start operations in Sí£o Tomé.

No oil is expected to be extracted from Sí£o Tomé until 2007 or 2008, but the country has nonetheless become a international flash point, leading experts on West Africa to speculate it was only a matter of time before jostling for power ahead of the oil rush would evolve into political instability. Revenue from licensing agreements alone could reach $200 million in the next two years, an amount about four times the size of the national budget.

"Sí£o Tomé is a microstate with limited capacity to absorb a big influx of cash," said Stephen Harrison, director of the Africa program at the Center for Strategic and International Studies in Washington. "It's also in a neighborhood with two very muscular players, Angola and Nigeria, opening the door for runaway competition for its resources."

President Fradique de Menezes of Sí£o Tomé was in the Nigerian capital, Abuja, when Major Pereira led the apparently bloodless putsch on Wednesday. He accused the mutinous troops of being influenced by "the smell of oil." He has remained in Nigeria.

James Burkhard, an Africa analyst at Cambridge Energy Research Associates, said investors were expecting the coup to collapse in the face of international pressure much in the way a similar power grab in 1995 dissipated after Angola stepped in to mediate between parties. "The age of oil is upon Sí£o Tomé, so some level of friction is to be expected," he said.

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