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Russian move on Nigerian gas bodes ill for the West
Russia's moves to tap Nigeria's huge energy reserves will send shivers
through western governments already concerned about a shortage of global
gas supplies. Gazprom, Russia's state-owned energy giant, has offered to
invest billions of dollars in developing the gas sector in Nigeria,
where western majors have traditionally put most of their efforts into
extracting oil.
Nigeria, Africa's biggest oil exporter, is believed to have some of the
largest untapped gas reserves in the world.
Gazprom's move comes at a time when North American and European
governments are increasingly turning to gas imports to meet rising
demand as domestic production falls. Western nations are also
particularly keen on securing supplies of liquefied natural gas -- gas
cooled to a liquid so it can be transported by tankers around the globe
-- to reduce their dependence on vulnerable pipelines. Demand for LNG is
set to reach 16 % of global gas demand by 2015, but supply conditions
are tightening.
Delays in implementing LNG plants in Egypt, Australia, Indonesia, Russia
and Iran could give Nigeria, with its giant gas reserves and
accessibility for US and European markets, even more strategic
importance.
Gazprom has yet to submit detailed proposals to the Nigerian government
for developing its gas industry, but the company says it is willing to
help capture gas currently burned as waste during oil production in the
Niger Delta. Nigerian energy officials say Gazprom executives have
tabled no specific proposals to build a new LNG plant in Nigeria, which
currently has a single LNG export facility. But Nigerian officials
believe that ultimately the Russians will aim to export gas through
their own LNG plant, or perhaps via Nigeria's planned Trans-Sahara
pipeline.
"Gazprom is talking about co-operating across the whole spectrum of
Nigeria's gas industry," said a senior Nigerian energy industry
official. "But their ultimate aim is to export gas to the market in
Europe and America, and that would presumably be through LNG."
Analysts say Gazprom has also signed an accord to help develop an LNG
plant in Nigeria's neighbor, Equatorial Guinea, which might also provide
a potential route for exporting Nigeria's gas reserves to the west. So
far, concerns over cost, security, political risk and the environment as
well as problems sourcing raw gas supply have hindered oil
multi-nationals in meeting growing LNG demand.
"Because you have a multiplicity of factors it's not that there is a
silver bullet out there that could solve these problems," said Frank
Harris, an LNG expert at Wood Mackenzie, energy consultants.
Consuming countries had some cause to celebrate late last year, when a
group of major companies including Chevron, Total, BP and ENI decided to
build an LNG plant in Angola. But out of 11 LNG projects thought by
industry analysts to be ready for an investment decision last year, only
two, in Angola and Australia, have come through.
Together they should add 10 mm tpy of production capacity -- 80 mm less
than if all 11 had been sanctioned.
Three projects in Nigeria are also falling behind schedule because of
security concerns. Gazprom's offer to generate power in Nigeria from gas
also raises questions about how much will be left for export.
"The Russian government wants Gazprom to anchor the expanding
relationship between Nigeria and the Russian Federation," a Nigerian oil
official said. "They now have to come down to the detail of what they
want to do. We are waiting for them."
