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Oil-Driven Sao Tome Gets New Premier

Sao Tome's embattled president has named a new prime minister ahead of elections due next year. Efforts to develop oil in the twin island state in the Gulf of Guinea has brought about political instability.

President Fradique de Menezes named the head of the central bank, Maria do Carmo Silveira, as his new prime minister.

He said on state radio he had approved the proposal from the biggest party in parliament, known as the MLSTP. Mr. de Menezes's own party has the second most seats.

Former prime minister Damiao Vaz d'Almeida was the latest in a long line of premiers to resign under the combative president, citing lack of support and also concerns about his latest oil deals with Nigeria.

Sao Tome and Nigeria share a joint development zone within which they have just awarded the rights for exploration of several blocks to Nigerian and medium-sized U.S. companies.

The MLSTP believes more time should have been taken to award the blocks and accused Mr. de Menezes of bowing to Nigerian pressure, when he finalized the awards last month. He denies this. The offshore potentially-lucrative joint zone was established to end a maritime border dispute with Nigeria and give Sao Tome a chance to expand its previously cocoa- and fishing-dependent economy.

An American pro-transparency oil activist, Ian Gary, who advised Mr. de Menezes last year on how to make oil a boom rather than a curse, says the president has very little room to maneuver.

"Politically it's a mess and then there's the situation with the joint development zone and the fact they have to make decisions jointly with Nigeria and the problems with the oil block licensing and implementing the bidding awards and trying to ensure that the companies that are successful are actually legitimate companies that have technical capacity and can exploit the fields," he said.

Despite the criticism, a London-based analyst who is closely following the joint development zone, Chris Melville, says he believes Mr. de Menezes got a good deal.

Unlike for the first oil block, for which Mr. de Menezes just got assurances Sao Tome will get the signature bonus money of about $50 million, major oil companies did not show any interest in the second round of bidding.

"It's probably as good as we could have got it," he said. "They've opted for alliances with some Nigerian interests and also some medium sized U.S. companies involved who are more experienced about operating in these kinds of areas. And they turned down some lesser-known names, some Nigerian companies that may not have been quite as successful in developing the oil even though their bids were higher."

Legislative and presidential elections are due in 2006, both expected to turn on the issue of the potential oil bonanza.