About 20 companies have lodged bids for the nine offshore blocs controlled by the state, and Nigeria, with $123m offered for one bloc alone, a local official said.

With Sao Tome standing to get 40% of the proceeds, its officials clapped and gasped at the size of the sums.

But its president warned of the dangers in his country's first oil venture.

President Fradique de Menezes said oil could be as much a blessing as a curse if it was not managed properly.

The BBC's Barnaby Phillips, who was at the ceremony where the bids were announced, says that in other parts of West Africa, oil production is synonymous with corruption and conflict.

President de Menezes, who narrowly survived a coup by army officers in July, promised that Sao Tome would be open and accountable.

From cocoa to oil

ChevronTexaco, ExxonMobil, Statoil, ERHC (Environmental Remediation Holding Corporation) and Nigerian companies were among the oil companies which made bids, local officials said.

Details of the bids were not released officially but Sao Tome state radio said Bloc One had fetched $123m from one company and offers above the minimum of $30 m were received for all the others except Bloc Eight.

The Joint Exploration Authority, which is composed of officials from Sao Tome and Nigeria, is due to announce the successful bids in two weeks' time.

Our correspondent reports that for hundreds of years, the people of Sao Tome and Principe have lived in poverty.

A former Portuguese colony, its struggling economy was based on cocoa until this week's bids.

Oil are companies convinced that it sits on billions of barrels of oil.