Militants in Niger Delta … bad for Nigeria, could be good for Angola & Ghana

oilrig_1515_18918777_0_0_7306_300Like many developing nations with vast natural resources, Nigeria has seen a massive influx in Foreign Direct Investment (FDI), particularly in the energy sector. However, civil unrest, particularly in the Niger Delta, may be a catalyst for potential investors to look to other West African Nations as investment opportunities. Added to this are the ever present problems of ineptitude & “graft” within both state & federal government, which has brought some unwelcome news for Africa’s largest economy.

Last week, Russian giant Gazprom (OTC : OGZPY) announced that it was in discussions to inject up to $2.5 Bn into a joint venture enterprise with state owned Nigerian National Petroleum Corp (NNPC), with a view to developing domestic gas production, processing, and transportation.” Nigeria has an estimated 187 trillion cubic feet of natural gas reserves. Industry experts see the deal as a positive move by the federal government to utilize the country’s huge gas resources that have hitherto been wasted, it is estimated that Nigeria flares off as much as 14% (24 billion cubic feet) of global gas wasteage.

The Russian gas company is attempting to become involved with the Trans-Saharan gas pipeline (TSGP). The pipeline, which would connect the Niger delta in Nigeria and Niger, to existing gas transmission hubs to the European Union at El Kala or Beni Saf in Algeria’s Mediterranean coast, is expected to cost $10 billion, of which Gazprom will initially invest $2.5 billion. The project is due to commence in 2009 and isplanned to complete in 2015, when Nigeria hopes it will become one of the biggest sources of natural gas for continental Europe.

Livi Ajounuma, General Manager at NNPC, confirmed that “we have signed a Memorandum of Understanding [MOU]“. He commented further on the deal saying, “It’s a good thing. It means that a giant company like Gazprom can come to Nigeria.”

All is not as rosy as it may seem however, as the Russian Ambassador to Nigeria, Alexander Polyakov, staged a withering blow at Nigerian confidence this week. Polyakov has called on the Nigerian authorities to create a stable environment for foreign nationals who come to work in the country, to continue the flow of foreign investment and development of the economy. Over 200 foreigners and countless Nigerians have been kidnapped in nearly three years of rising violence across southern Nigeria. Some militants claim to be fighting for greater control over the Niger Delta’s oil wealth, however, other gangs of armed, jobless youths make money from extortion and kidnapping.

Polyakov urged prompt release of all hostages, including some Russians,currently being held by militants in Nigeria’s southeast Niger Delta region.”Everybody in the region and the government should play their role to ensure that all hostages are freed,” he said.

There are strong indications that investment inflow to the upstream sub-sector of the Nigerian oil industry has started dwindling as foreign investors now choose Angola and Ghana as preferred destinations over Nigeria. Which in turn, threatens Nigeria’s capacity to grow its crude oil reserves as planned, it is targeting 40 billion barrels proven reserves by 2010. Analysts have identified insecurity in the Niger Delta and weak fiscal policy as key reasons why investors are beginning to leave for more stable business opportunities in Africa. Recently due to militant activity Royal Dutch Shell (NYSE : RDS:A) has seen its production dropping from one million bpd to about 380,000 bpd at its Bonny terminal in the south of the Delta. Exxon has also experienced increased insurgent activity in its Nigerian operations.Last week, local union officials threatened to call a strike which would shut down crude exports from the River state, until such time as the issues are addressed by State & Federal officials. Nigeria is already suffering from production slow down due to militancy, currently the Niger Delta is only exporting 1.8 million bpd, compared with a targetted 2.2 million bpd.

Near neighbour Angola has now  begun to attract more investments from oil companies as International Oil Companies are making long term expenditure commitments in the African oil ventures. Total (NYSE : TOT) said last week that it would continue with a $9 billion investment to raise production in Angola, despite the huge drop in crude prices since July last year. Total plans to stick to its major investments in Angola, even as it expects crude prices to recover, the company’s top official in Angola said.

“We are living through a crisis that has pushed oil prices to very low levels. Therefore, we are being extremely strict with all our investments,” Olivier Langavant, Director General in Angola, was quoted as saying in an interview with Reuters. “But the big projects (in Angola) like the Pazflor, which is a $9 billion investment, will be maintained.”

Pazflor, Total’s third production hub in Angola’s offshore Bloc 17, is expected to begin pumping oil in 2011 from water depths of up to 1,200 metres, according to the company’s website. Total is the third biggest oil producer in Angola after Exxon Mobil Corp. and Chevron, pumping, on average of over 500,000 barrels per day.

Chevron, Total and Eni are currently developing a $4 to $5 billion liquefied natural gas plant in Soyo, Angola. Whilst in contrast, Nigeria’s flagship Olokola, Brass LNG and NLNG Train 7 projects are yet to take off. Because of the high spend of the oil majors in Angola, oil service companies have begun to win big contracts. BP has awarded Halliburton more than $600 million in contracts for up to four projects in Angola.

Meanwhile, in Ghana, offshore oil finds in 2007 have led analysts to look at the small nation as becoming an “African Tiger”. Three vast blocks off of the West Cape Three Points are believed to hold vast reserves that may well outshine those enjoyed by Nigeria. The Jubilee field, one of West Africa’s biggest oil strikes in years, likely containins recoverable reserves of at least 1.2 billion barrels of oil equivalent, with first output scheduled for the second half of 2010. IOCs are lining up to take advantage, as smaller independent firms such as Kosmos Energy struggle to find capital to devlop proven resources in the area. Kosmos is reputed to have a $3Bn stake in the area up for grabs, according to industry website Rigzone. The current breakdown of partnership/ownership across the three blocs which can be viewed here at AfDevInfo, also includes US independent Anadarko (NYSE : APC)  & the UK’s Tullow (LON : TLW), along with various Ghanaian government run corporations.
This at a time when foreign investors in the Nigerian capital market withdrew some $4 billion from the Nigeria Stock Exchange kick starting a decline of over 50% in three months, according to its Director General, Professor Ndidi Okereke-Onyiuke. Coupled with an ever rising inflation rate, the highest for more than 5 years, is a major setback for Nigeria’s hopes of becoming a local economic giant.

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10 responses to this post.

  1. [...] juancarlosnavanava wrote an interesting post today onHere’s a quick excerpt Like many developing nations with vast natural resources, Nigeria has seen a massive influx in Foreign Direct Investment (FDI), particularly in the energy sector. However, civil unrest, particularly in the Niger Delta, may be a catalyst for potential investors to look to other West African Nations as investment opportunities. Added to this are the ever present problems of ineptitude & “graft” within both state & federal government, which has brought some unwelcome news for Africa’s largest economy. Last week, Russian giant Gazprom (OTC : OGZPY) announced that it was in discussions to inject up to $2.5 Bn into a joint venture enterprise with state owned Nigerian National Petroleum Corp (NNPC), with a view to developing domestic gas production, processing, and transportation.” Nigeria has an estimated 187 trillion cubic feet of natural gas reserves. Industry experts see the deal as a positive move […] [...]

  2. Really its a great post. I hope it will help all

  3. [...] Top Posts The ProjectBolivia’s Lithium quandarythe Bear & the Dragon shake hands on $25Bn energy dealIndonesia – the long road backChina stocks up on energy & raw materials while prices are depressedDoComo looks to India for growthMilitants in Niger Delta … bad for Nigeria, could be good for Angola & Ghana [...]

  4. Posted by akinokunowo on July 11, 2009 at 6:13 am

    How many of the weapons provided for the youths to rig elections in 2003 and 2007 have been recovered? These militant groups started their troubles in 2003/04 struggling over control of bunkering routes in Niger Delta. They were favored politically to make money from this illegal oil business in 2003 and they were getting richer. Atake Tom and Dokubo-Asari were the leaders of the most prominent cult groups involved in this bad business and they were working for some politicians in government.

    To be frank with you, MEND is a bunch of oil thieves in the region. All the money they were making from the oil and kidnapping since they have been in control of the bunkering business in 2004 are not spent to improve the lives of the people of the region. They used it to enrich themselves and arm themselves to make more and more than they are seeing. That is why Dokubo-Asari can afford to go abroad for medical treatment. In Nigeria, only the very rich ones seek medical treatments abroad. Considering the level of poverty in the region, what job is Dokubo doing that he is as rich as he is now? The same thing applies to the rest of the militants, they are all criminals.

    Imagine the wealth they control in the region and the accounts they own. Meanwhile, NDPVF started using the excuse of the suffering of the people in the region to perpetuate their criminal activities. I am disappointed that the press keeps avoiding the truth, they are always scared of being critical on the subject of campus cultism in Nigeria. I wonder how long it will take us to call a spade a spade. Virtually all the politicians in government today used campus cults to rig elections. They provided arms for the youths and exhaust law enforcement agencies to combat the problems.

    The people of the region deserve a serious and urgent change. They deserve better representation without being terrorized. The people are so much disaffected that they cannot support neither the government nor the militants, they are at crossroad, yet they are killed for nothing too. The government forces and the criminals kill them. Why must this continue? These people are not the cause of the uprising! It was the politicians. I think to start with, the former governor of the state, Dr. Peter Odili need to explain a lot of things for us. If he thinks otherwise, well I have a lot of questions for him and it will be better we both come on air to public talk about it.

    The problem is not only Niger Delta. Go everywhere in the country, the youths are armed beyond control, only that in the Niger Delta, oil is there and the criminals have established themselves to run illegal business forcefully with the use of sophisticated arms.

    The truth is that, without proper check and total eradication of campus cultism in Nigeria, the worst is yet to come. As far as the situation in Nigeria is for now, the people of the Niger Delta region are still not represented as oil thieves and political bandits are unleashing terrorism on the people with the use of arms to enrich themselves all in the name of fighting for the people.

  5. Posted by Paul Harper on July 13, 2009 at 7:27 am

    Thanks for the spirited & eloquent comments. As you say, it is easy for those not directly involved to make erroneous statements. When this was published on another portal, a stream of commenters (American naturally) starting flaming regards MEND being an Islamic Fundamentaklist sect.
    Alwayss good to get balance, so appreciate you words here.
    Paul

  6. [...] state oil company Sonangol to look at prospecting for oil off Guinea’s coast. As we reported previously, West Africa has become a hotbed of speculation & investment, as new oil fields are coming [...]

  7. [...] state oil company Sonangol to look at prospecting for oil off Guinea’s coast. As we reported previously, West Africa has become a hotbed of speculation & investment, as new oil fields are coming [...]

  8. [...] Angola, as discussed in a previous post, Total is set to continue with a $9 billion investment to raise production, despite the huge drop [...]

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