Gazprom May Delay Nigerian Investment Plans Until Next Year

http://www.bloomberg.com/news/2010-11-18/gazprom-may-delay-nigerian-investment-plans-until-next-year.html

OAO Gazprom, the world’s largest gas producer, may delay plans to invest billions of dollars in Nigeria until after an oil bill is passed and general elections are held next year.

“Any investment decision has to be after the elections,” Vladimir Ilyanin, chief executive officer of Gazprom’s Nigerian unit, said in an interview yesterday in the capital city of Abuja. Once the polls are over and legislation is passed, “we’ll roll out our plans.”

Nigeria has Africa’s biggest hydrocarbon reserves of about 36 billion barrels of crude oil and 187 trillion cubic feet of gas, according to the Petroleum Ministry. The country plans to spend $30 billion to build a gas pipeline network and processing facilities to supply domestic users and a pipeline across the Sahara Desert to Europe. Failure to link power plants now under construction to gas supplies by investing in a pipeline network will frustrate efforts to end chronic power shortages, Bart Nnaji, presidential adviser on power, said Nov. 8.

The country’s parliament is working on new petroleum industry legislation that will spell out rules for operating in the oil and gas business. The law is likely to be approved before the end of this year, Emmanuel Egbogah, presidential adviser on petroleum, said Nov. 16.

The delay in passing the bill is a “major impediment,” Ilyanin said. “We need clear rules and a level-playing ground.”

Shell, Chevron

International oil companies, including Royal Dutch Shell Plc and Chevron Corp., have protested against proposals to raise oil royalties and taxes, which they say will discourage capital- intensive investments in the country’s deep offshore waters. Nigeria says oil production will remain competitive under the provisions of the law.

Last year, Gazprom signed an agreement in Abuja to form a company called NiGaz Energy Co. Ltd. that will invest in gas production, transportation and infrastructure in Nigeria. Boris Ivanov, head of Gazprom’s global exploration and production unit, valued the venture at a minimum of $2.5 billon.

“The projects are long term” and the partners are in “a lot of discussions,” according to Ilyanin.

Gazprom also has an understanding with Nigerian energy company Oando Plc “to jointly develop projects in multiple sectors of Nigeria’s oil and gas industry.” The two operators were among 15 energy companies selected by the Nigerian government in March last year as potential investors to help develop gas projects.

Political tension has heightened in Africa’s most populous nation after President Goodluck Jonathan, a southerner from the oil-rich Niger Delta region, declared his intention to run for president again in the elections expected to be held in April.

To contact the reporter on this story: Paul Okolo in Abuja pokolo@bloomberg.net.

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net.