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Nigeria: Another Potential Energy Supplier of D-8

Abuja, Nigeria | January 09, 2008 by D-8 Secretariat

FuelNigeria exports about 18 million tons of liquefied natural gas every year through Nigeria Liquefied Natural Gas, jointly owned by the state energy company, Shell, Total and Agip. Two other huge LNG projects, OK LNG and Brass LNG, are also on the drawing board. They each will cost about $10 billion to build and involve a consortium of western multinationals.

Nigeria is the 10th largest oil producer in the world and the third largest in Africa. Oil revenues account for about 95% of Nigeria’s foreign exchange earnings.

This potency has been eyed by the Russian energy monopoly Gazprom, that held talks with Nigeria to spend up to $2.5 billion on developing its vast natural gas reserves, a senior Nigerian gas official said on Saturday, as reported by Reuters.

The Russian company is on a global hunt for new reserves and has emerged as one of the leading suitors to Africa’s top energy producer as it reforms its gas sector. “Gazprom has come twice to visit the federal government. They want to invest in Nigeria in gas exploitation, gathering and processing,” a senior Nigerian government official working on gas policy told Reuters. Gazprom has offered to invest between $1 billion and $2.5 billion to begin with, he added.

Nigeria is the world’s eighth-biggest exporter of crude oil but even though it has the seventh-largest proven gas reserves in the world, it has not developed its gas industry to anywhere near full potential.

Investors say the lack of a stable fiscal framework and market pricing for gas means that most investment ideas in the sector are uneconomic. UK-based companies BG Group  and Centrica have also proposed multi-billion dollar investments in Nigerian gas, the official added, asking not to be named because he is not allowed to talk publicly on behalf of the government.

Turkey, one of the memberstates of D-8 Organization, is a major consumer of oil and energy. Iran is Turkey’s second-largest gas supplier after Russia. Turkey also imports gas from Ukraine, Romania and Bulgaria and supports the natural gas supply system via liquid natural gas (LNG) terminals in Aliağa and Marmara Ereğli, imported by special ships.

In heating and electricity production, Turkey is 50 percent dependent on natural gas. The country’s overall need for natural gas in a year is over 30 billion cubic meters, with 48 percent of this gas used for producing electricity. The amount of natural gas used in cities, meanwhile, is around 10 billion cubic meters. During winter, Turkey uses approximately 140 million cubic meters a day.

However, Iran halted its supply to Turkey this week, due to the disruption on cold weather and a cut in Turkmen gas supplies to Iran.

While efforts to persuade Russia to provide additional supplies continue, the Turkish Energy Ministry is also taking certain precautions, including reducing the amount of natural gas provided to the auto industry. The ministry has already increased the amount of LNG from Nigeria and Algeria via the terminals in Aliağa and Marmara Ereğli.

D-8 Organization is to expect in the Working Group on Energy meeting this year, Turkish’ needs of oil and energy can be discussed among memberstates. D-8 has already started to witness a number of significant collaboration projects among its member in major sectors including energy, such as between Iran, Indonesia, and Malaysia.

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