Sao Tome and Principe will insist energy firm Equator Exploration pays a signing bonus and proves it has solid finances before allowing it to develop two offshore oil blocks, a government official said.
Equator, a British Virgin Islands-registered exploration and development company, won permission to acquire two of the 19 blocks in the West African island nation's "exclusive economic zone" after funding seismic studies in 2001 and 2005, and negotiations on the deal started this week.
Sao Tome is offering seven of the other blocks in the zone in a lease auction that closes in September and which has already attracted the interest of at least eight big global energy firms, including ConocoPhillips, Chevron, and Petrobras.
"The contract will have a number of clauses, including the payment of a signature bonus, proof of the company's financial capacity, and a work schedule on seismic studies to improve knowledge about the blocks," Sao Tome and Principe's Resources Minister Xavier Mendes said.
Equator's chief operating officer, Philip Dimmock, said negotiations on the two blocks -- block 5 and block 12 -- would likey be completed within a few months. Equator is listed on the Alterative Investment Market of the London Stock Exchange.
Sao Tome depends on its cocoa industry for the bulk of its revenues but hopes to become an oil producer within eight years given its offshore territory lies in a region rich in crude deposits.
Nearby Equatorial Guinea, Nigeria, Cameroon and Gabon have all earned billions of dollars from development of their oil fields in the Gulf of Guinea.
Sao Tome's Prime Minister Joaquim Rafael Bronco, along with officials from the state oil company ANP, met with oil executives in Houston in April to discuss terms for the blocks on offer with an eye toward incorporating the feedback into eventual contracts.
The country's first oil licenses were sold in 2004 but development was delayed by a row with Nigeria over their shared maritime border. Aside from its exclusive oil blocks, Sao Tome and Nigeria share a joint development zone where exploration activity is ongoing but where commercially exploitable reserves have yet to be discovered.