Gazprom seeks Nigerian gas development

Russia's Gazprom is in talks with Nigerian energy officials to develop the country's vast gas reserves under a possible $2.5 billion deal.

Uchenna Izundu
International Editor

LONDON, Jan. 9 -- Russia's OAO Gazprom is in talks with Nigerian energy officials to develop the country's vast gas reserves under a possible $2.5 billion deal, prompting fears in Europe and the West about the company's domination of gas supplies.

Gazprom said it was interested in developing a relationship with Nigeria, which it regards as a key place in sub-Sahara Africa. A company spokeswoman told OGJ that "Africa is one of Gazprom's priorities, as the company made a decision to go global in terms of acquiring assets and developing strategy outside Russia." It is looking at exploration, gathering, processing, technology transfer, and infrastructure development.

Nigeria is developing a number of gas export projects and has called for foreign investment, including power generation plants, liquefaction proposals, and the Trans Sahara gas pipeline, which would transport gas through Algeria to Europe. It has been particularly keen to attract non-Western support, looking to India and China to sign deals. Nigeria has committed to eliminating gas flaring by 2008, and this could present another investment opportunity for Gazprom.

Under Nigerian President Umaru Yar'Adua's energy agenda, domestic gas development is taking precedence so Nigeria can realize its economic potential and improve living standards for its citizens (OGJ Online, Dec. 12, 2007). The country will ramp up domestic power production. Gas-fired electric power generation will be expanded to nearly 15 Gw by 2012 from none in 2007. Gas use for power will expand to more than 6 bcfd by 2011.

International development programs are of increasing importance to Gazprom as domestic production stagnates. Analysts Global Insight said any deal would ensure that "Gazprom will also control some Nigerian gas that could potentially compete with Russian gas for a share of the European market. Gazprom could divert some of its Nigerian gas production to the domestic market, reducing the overall gas volumes available for export from Nigeria." Gazprom's investment would position it as a direct competitor with Western supermajors for access to energy reserves in West Africa, it added, signalling a determination to wage influence in the region.

Nigerian oil industry officials have so far described the talks as "productive", but no agreements have been signed.

Contact Uchenna Izundu at uchennai@pennwell.com.

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