Rich pickings in African island oil

THE tiny West African island group of Sao Tome e Principe has poor roads, rampant malaria and a population of about 150,000.

But now City punters are being given the chance to make money out of an oil bonanza that is set to transform one of the world's poorest countries.

Equator Exploration is looking to raise up to £20m through an Alternative Investment Market listing to hunt for oil in two huge deepwater blocks, each of them 4,000 square kilometres.

The company negotiated options for two blocks in 2001 after US giant ExxonMobil sparked an oil rush by finding deposits thought to hold up to 10bn barrels of crude.

Ever since, the country has been the centre of a fierce power struggle, centring on a dispute over territorial waters with nearby Nigeria and an ultimately doomed coup last year.

The Americans have moved in and are reportedly keen to turn pro-West Sao Tome into one of its most important strategic bases in the Gulf of Guinea.

Equator's roadshow hits London today and banker ODL Securities hopes the group will command a market value of £75m when shares begin trading at the start of next month.

Tony Clements, head of corporate finance at ODL, said: 'This is not an opportunistic move to take advantage of the high oil price. This company has been built up over the past five years and is not a dotcom conceived on a Sunday, listed on a Wednesday and bust by Friday.'

Based in the British Virgin Islands, Equator is chaired by Sir Sam Jonah, the respected president of miner AngloGold Ashanti. The day-to-day running is in the hands of chief executive Wade Cherwayko.

Cherwayko was close to Houston-based ERHC, the Nigerian company that controversially secured exclusive exploration rights to Sao Tome's waters in 1997.

West Africa has fast become one of the most desirable destinations for the oil industry, with an increasing amount of offshore drilling taking place in Equatorial Guinea and Mauritania.

Fields containing 17bn barrels of oil are due to come onstream in West Africa in the next five years, seven times the amount in the previous five years.

Canada-based oil explorer Adulis Resources is raising £20m and taking a secondary listing on Aim at the end of the month. The group has put together a portfolio of 10 'high-risk' fields in Colombia.