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RUSSIA'S GAS ADVENTURE 

 

Tuesday, January 22, 2008.

 

By Chippla Vandu

 


 

The Financial Times reports that the Russian gas company, Gazprom, is in talks with the Nigerian government on the development of the latter's gas fields. These talks centre on Gazprom investing in "energy infrastructure" in Nigeria "in return for a chance to develop some of the biggest gas deposits in the world" according to information on the Financial Times' website.

What does come as a surprise is the fact that the report claims that Russian president, Vladimir Putin wrote to the Nigeria leader, Umaru Yar'Adua on the need for an energy partnership between both countries. This may, however, not be unconnected with statements made by Putin, in early 2007, to the Kremlin, in which he made it clear that the concept of a group of gas exporting countries was worth looking into,
as reported by Reuters
.

The current Nigerian leadership, unlike its predecessor, has hardly hidden its displeasure with the big oil multinationals currently operating in the country. In October 2007, Business Day (a Nigerian business newspaper)
reported
that indecision on the part of the Nigerian government was harming Liquefied Natural Gas (LNG) projects, which the Nigerian state-owned oil company (the Nigerian National Petroleum Corporation) was undertaking with the multinationals.

While the previous Nigerian government, headed by Olusegun Obasanjo, had approved the LNG projects for the export of gas, the current government appears to be of the view that sufficient gas should first be channeled to the domestic market to meet an acute, though seemingly unsolvable, energy crisis that has been growing for the past two decades.

Also in October 2007, the Nigerian government initiated moves to renegotiate oil contracts signed with multinationals such as ExxonMobil, Royal Dutch Shell, Chevron, Total SA and Eni as reported by the
Nigerian Vanguard
.

 

Future onshore oil contracts could likely all be Production Sharing Agreements (a method widely used in the Middle East) and not Joint Ventures. Thus, multinationals would not only be required to fully fund their activities, but they would also not be able to book Nigerian oil and gas reserves as their assets.

Such a move, by the Nigerian government, could be viewed by some as resource nationalism. It is however, undoubtedly, driven in part by the fact that the Nigerian government feels it is no longer getting a good deal out of contracts signed when oil fetched a mere $15 to $20 a barrel on the international market.

The big question though remains: does such 'unfriendliness' on the part of the Nigerian government towards oil multinationals also extend to Chinese oil companies and (potentially to) Gazprom?

 

It is an undeniable fact that the government-owned Nigerian National Petroleum Corporation does not possess the technical know-how or capability to competitively develop its oil and gas fields and grow its production capacity. Thus, the need for private participation in the oil and gas industry (be it from oil multinationals or domestic firms).

In 2006, the Chinese state oil firm, CNOOC, signed deals with the Nigerian government and was granted access to oil fields in the Niger Delta (refer to
this article
on this blog).

 

Sino-Nigerian oil deals appeared to go much beyond the traditional concept of a multinational coming into a country, prospecting for oil and developing a field—that is if oil were found—and eventually reaping good returns.

 

They appeared tied to the need to help develop local infrastructure— in some cases the infrastructure were not directly related to oil and gas. CNOOC deals were in essence government-to-government deals, signed at time when there was a militant insurgency in the Niger-Delta—an insurgency that continues to this day.

What about Gazprom? What does it have to offer? The Financial Times report (referred to in the first paragraph of this write up) provides next to nothing on this, though it quotes a Nigerian government official as saying:

 

"What Gazprom is proposing is mind boggling. They are talking tough and saying the west has taken advantage of us in the last 50 years and they're offering us a better deal."

 

Until such a deal is made public (should the talks between Gazprom and the Nigerian National Petroleum Corporation bear fruit) I remain deeply skeptical. Gazprom, like any other energy conglomerate, is simply strategically positioning itself for global growth beyond the shores of Eurasia.

 

Already a key player in the European gas market, in addition to being 'the' key player in the Russian gas market, it now has its eyes set on a region of the world in need of exponential growth.

Gazprom doesn't really need Nigerian gas. Russia has nine times the gas reserves of Nigeria. To put this in context, Russia has the largest gas reserves in the world, at 27% of global reserves (based on information from
BP's Statistical Review of World Energy
).

 

But Gazprom needs access to strategically positioned gas. As a significant player in the global LNG business and with Africa's largest gas reserves, Nigeria seems a good place to start. Gazprom would not go into Nigeria to save it from the perils of western oil multinationals. It would go there for business and strategic reasons. Forget the east-west jargon. The world is not divided into black and white.

 

Chippla Vandu is a Nigerian scientist and researcher based in Holland. He blogs as Chippla.

 

Please e-mail comments to comments@thenewblackmagazine.com

 

 

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