September 13, 2008


Can the rules of a game be changed midstream? This is the poser that multinational oil companies are raising as the Federal Government is set to order them to divert a great percentage of their gas exports to the local market. This is part of the government's efforts to meet its power emergency target. Sources told the Nigerian Compass that the companies are set for a showdown with the government, noting that the plan will result in huge financial losses to them. The companies believe that the government's plan is "an ambush," and a "strange" introduction into their operational agreements with Nigeria. The plan, it was further learnt, will badly hurt the revenue targets of the companies. They are already exploring the options available to them, which may include litigation. State assemblies have begun to pass power emergency spending budgets, which will enable the Federal Government to spend $5.5 billion to complete various independent power projects scattered across the country. President Umaru Musa Yar'Adua is currently working on how to compel the international oil companies (IOCs) to divert a greater portion of gas from exports to domestic use. The plan has been acknowledged by the Economic Adviser to the President, Tanimu Yakubu, who said that to Yar'Adua, "emergency power declaration is about seizing gas from the exporting companies to meet our energy needs." Yakubu made the declaration during his recent visit to Moscow, Russia, to witness the endorsement of a Memorandum of Understanding (MoU) between the Nigerian National Petroleum Corporation (NNPC) and a Russian multinational company, Gazprom. He said: "The President has fulfilled all the necessary conditions precedent to declaring a state of emergency in the power sector. He has now stabilised power generation at more than 3000 megawatts (MW), his threshold before emergency power declaration which, for him, is about seizing gas from the exporting companies to meet our energy needs." Yakubu added: "Power output is now heading towards 4000MW. He would not tell it himself. He hates that he deserves accolades for being so performance biased." The Special Adviser on Energy, Dr. Rilwanu Lukman, also confirmed the development, disclosing that the government was in the process of reviewing "the oil contracts in place to provide for periodic review and renegotiation (and) that time has arrived." Presidency sources told the Nigerian Compass that Yar'Adua was particularly "convinced that more gas must be put into the domestic market to overcome chronic electricity supply problems, but the multinational companies, whose investments are based on exporting, are less convinced". The Federal Government Committee on Emergency Gas Supply Strategy to Power Plants and the Domestic Sector submitted that gas should be prioritised for emergency supply to power plants and homes. A source at the NNPC expressed doubts about the possibility of the President realising his plan, noting that some of his advisers are canvassing the discontinuation of some gas projects initiated by the Olusegun Obasanjo administration. Nigerian Compass front page.


Worried by last month's invasion of Georgia by Russia, the European Union (EU) is pinning its hope of regular gas supply in the future on the planned $10billion trans-Saharan gas pipeline project. The project, through which Nigerian gas will be piped into Europe via the Sahara desert, is seen as the safest alternative to Russian gas. Five European Union members are wholly dependent on Russia for their natural gas. Four others receive more than 50 percent of their natural gas from Russia. A third of all EU oil imports come from Russia. Russia is turning out to be a bully in the region and energy experts believe that it will not hesitate to use energy as a weapon. On December 1, 2006, Russia cut off natural gas supplies to and through Ukraine because of a contract dispute. With about 80 percent of the natural gas Europe imports from Russia passing across Ukraine, the effects were felt not just in Ukraine, but as far as Italy. In May last year, Russia cut off delivery of oil products and coal to Estonia because the country decided to move a monument to the Red Army to a less prominent location. EU Energy Commissioner, Andris Piebalgs, who expressed deep interest in plans to develop the 4,300-kilometre trans-Saharan Gas Pipeline from Nigeria through Niger and Algeria en route the Mediterranean, admitted that it could help the group diversify its energy sources. Piebalgs, who is in Nigeria, ahead of talks on energy projects and peace in the restive Niger Delta said: "Nigeria is already very important for our security of supply — 20 percent of their oil and 80 percent of their gas goes to Europe". Nigerian gas is currently shipped to Europe as liquefied LNG. A pipeline is therefore seen as improving security in Africa's transit regions, thereby reducing the flood of migrants to Europe. "The development of a trans-Saharan project with 20 billion cubic metres a year that might arrive to Europe by 2015 and increase the security of supply of Nigeria itself and the countries it crosses, makes it a very interesting project for Nigeria and Europe," said Piebalgs. Nigeria has the world's seventh-largest proven gas reserves, but has been unable to develop its gas industry to anywhere near its full potential because of a lack of funds and regulation. The EU is not alone in courting Nigeria for its oil and gas reserves. Last week, Russian gas giant, Gazprom signed an oil and gas exploration agreement with Nigeria with the hope of developing LNG exports to North America. Nigerian Compass front page.