Several years ago, many oil experts and local politicians said the tiny islands of Sao Tome and Principe were on the verge of an oil boom. But islanders and oil companies that paid millions for drilling rights are still waiting for an oil strike. A recent drilling expedition did not find any oil deposits that would be profitable. Government officials, donors and energy analysts are now reassessing their oil expectations for Sao Tome. Phuong Tran reports from VOA's West Africa Bureau in Dakar on the mix of politics, poverty and petroleum in the shores of West Africa.

A schoolboy watches a merchant ship anchored off shore in Sao Tome, the capital of Sao Tome & Principe (file photo)

Because geologists suggested, as early as the late 1990s, there might be large deposits of oil beneath the waters of Sao Tome & Principe, oil companies rushed to stake their claims to the potential revenue.

They offered millions of dollars in signing bonuses for drilling rights to a country whose citizens earned on average less than $300 a year.

Julian Lee, an energy analyst with the London-based Center for Global Energy Studies, says this bidding frenzy was fed by nearby oil discoveries.

"I think a lot of the excitement we heard, four to five years ago, about Sao Tome was really generated by a number of big western oil companies hoping that the waters off the coast of West Africa would prove to be a prolific source of new oil," he said. "There had been big deep water discoveries off Angola, off Nigeria. The hope was that the Nigerian discoveries would continue further south to the waters of Sao Tome."

The first company to win drilling rights in the area between Nigeria and Sao Tome - known as the Joint Development Zone - was Chevron, which paid more than $120 million for the right to drill.

This past month, the company reported its first expedition did not uncover oil that could be sold commercially.

Rafael Branco, a former Sao Tomean oil minister, is not surprised. He says politicians eager for quick revenue had inflated the population's expectations.

"This is the work of politicians," he said. "The fact that the companies are saying that they need more time is good because it will help people to realize we should find other ways to develop the country. Money, per se, does not solve the problem of poverty. There are plenty of countries with oil where poverty is increasing."

Energy analyst  Lee says, although it may take time to assess Sao Tome's oil potential, no one will write off the country based on the results of a single exploration.

"The whole process of negotiating exploration rights in Sao Tome really has slowed down. I do not think this will be permanent. I think interest will rise again," he said.

World Bank Economist Dorsati Madani says the country should prepare, in case of an oil discovery. Sao Tome has received more than $2 million from the bank to develop its petroleum sector.

"We are not going to reduce the amount," said Madani. "The need is still there. Just because the first drilling did not produce commercially viable, for now at least, petroleum, does not mean there will not be any oil in the future of Sao Tome. It might be a bit delayed, but they still might find eventually petroleum."

But Madani says - even if the islands discovered high quality oil now - it would still take about five years until the country receives any revenue from it.

"A big chunk of the production earnings will go back to the company to cover for the cost of the drilling. Then that is when the money starts 'pouring in'," she said.

She says that the average return in oil exploration is for every four wells that are drilled, one will turn out to be a money-making oil well.