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Africa Economic Institute

Nigeria and Russia in a Joint Venture for Energy

Russia and Nigeria plan to cooperate in a joint venture to exploit Nigeria’s vast gas reserves. Russia’s state-owned Gazprom would invest up to $2.5 billion to develop, extract and transport gas from Nigeria’s fields, the world’s seventh-largest proven gas reserves.

Russia and Nigeria’s presidents  Dmitry Medvedev and Umaru Yar’Adua signed six agreements on cooperation to explore and develop Africa’s biggest oil and gas sector, including in the natural gas and space spheres.

Russian state-owned energy giant Gazprom and the Nigerian National Petroleum Corporation (NNPC)  agreeded to cooperate and make deals on capital investment protection, extradition, and nuclear power.

Nigeria says foreign oil companies, like Gazprom, must first help build the Opec member’s gas infrastructure before it can begin to make plans to export the natural resource.

Russian President Dmitry Medvedev said Wednesday investment in Nigeria’s oil and gas sector could total in the billions of dollars after Gazprom signed a joint venture agreement with state-run oil firm NNPC. Medvedev becomes the first Kremlin leader to visit Nigeria, officials said.
“We have a chance to become major energy partners,” Russian President Dmitry Medvedev told reporters after meeting with Nigerian President Umaru Yar’Adua in the capital Abuja.

“If we carry out all our plans, Russian investment in Nigeria can reach billions of dollars.”

The government also plans to use gas to triple electric generator capacity to 10,000 megawatts by next year and pipe the cleaner fuel through the Sahara Desert to consumers in Europe.

 Nigeria has the largest gas reserve on the continent and is the world’s seventh largest producer. In addition to known reserves of 187 trillion cubic feet, there may be undiscovered gas of between 150 trillion and 400 trillion cubic feet, Petroleum Minister Rilwanu Lukman said in a interview.
Nigeria is rich in natural resources, including tin, columbite, iron ore and coal. It has 35 billion barrels of explored oil reserves and 4.1 trillion cubic meters of natural gas.

The two countries created a new company Nigaz, a 50/50 joint venture between the Gazprom and NNPC, aims to build refineries, pipelines and gas power stations throughout Nigeria.

Russia and Nigeria signed an agreement on March 18 this year to cooperate in building nuclear reactors in the African country and jointly explore for uranium.
Russia’s envoy to Nigeria, Alexander Polyakov, said Medvedev was invited by President Umaru Yar’Adua following talks on the sidelines of the Group of Eight (G8) industrialised powers in Japan last year.

Polyakov said “international issues would be on the agenda but primarily, the visit would be about bilateral cooperation. We would like to give a very strong political impetus to our interraction in different fields.”

“We have seen in the last few years on specific field developments, the Nigerian side has had difficulty in making its own contributions,” said Manouchehr Takin, an analyst at the Centre for Global Energy Studies in London. “The question I have is: ‘Is the NNPC financially strong enough to do a joint venture?’’ he added.
President Yar’Adua sent parliament an energy reform bill last August that restructures NNPC into a profit-driven company, which supporters believe will resolve the funding problems. It was unclear whether the legislation had enough political support to pass parliament.

The joint venture main project is the Trans Saharan, with capital costs estimated at US$10 billion for the pipeline and US$3 billion for gathering centers, would send up to 30 billion cubic meters a year of gas to Europe via a 4 128 km pipeline from Nigeria via Niger and Algeria.
The European Union, which relies on Russia for about 40 per cent of its gas and a third of its oil, has viewed the project as a way of diversifying its energy supplies. Nigaz also planned to bid for two of three biggest Nigerian gas exploration projects, which could amount to more than 2,3 trillion cubic metres.

Nigeria and Russia are huge trade partners, with trade of over $300 million a year. “We will take part in building the first segment of gas pipeline from southwestern Nigeria northwards,” said Boris Ivanov, head of Gazprom International AO. “If Trans Saharan pipeline is realised, it will be its first segment.”
The Western African country has recoverable uranium reserves. The joint venture between the two countries is focused on cooperation to build a  nuclear power plant, with 4 GW generation capacity.