Russia’s Gazprom Already Part Owner Of So-called Alternative Energy Source For E.U.

Posted: November 20, 2014 in Free Trade, Technology and Energy

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Nigeria: An Alternative Energy Source For The European Union?


By Gustavo Placido Dos Santos

Recent events in Ukraine and the threat posed by the European Union’s dependency on Russian energy — Moscow supplies a quarter of Europe’s needs for natural gas, 80% of which runs through Ukrainian territory — has led Brussels, and EU’s city-capitals, to consider alternative sources towards alleviating the dependency and thus increasing Europe’s energy security. Beyond Russia and European indigenous production — which accounts for 33% of the EU’s usage of natural gas—Europe’s five largest partners are Norway (22%), Algeria (9%), Qatar (6%) and Nigeria (2%).1 One can notice that the small share of Nigerian natural gas out of the total European imports does not correspond to Abuja’s real capacity and potential in becoming a strategic energy partner.2

In fact, the Nigerian government aspires to do just that. On the sidelines of the ministerial meeting of the EU-OPEC energy dialogue, which took place in Brussels in June 2014, Nigeria’s Petroleum Minister, Diezani Alison-Madueke, said “[t]he Federal Government restated its resolve to support the long term gas supply security for the European Union countries as part of measures to expand the nation’s gas market”.3

This strategic approach towards the European market is, on the one hand, a sign that the government in Abuja recognizes Europe’s energy market potential — the EU’s aspiration to diversify energy sources has motivated such an approach — and, on the other hand, is a product of recent developments in the global natural gas market. Among these developments the United States’ shift to the domestic exploration of shale gas, and Mozambique’s affirmation as a major player in the natural gas market4 are key. Being one of the most promising African countries, in terms of energy, the fact that Mozambique is located on the Indian Ocean’s shoreline has driven Asian powers to increasingly focus their attentions towards Maputo.5 Also worth noting is that Asia currently represents Nigeria’s main natural gas export market.6

For Nigeria, satisfying European natural gas needs implies an increase in the production of the resource. With that purpose in mind, Abuja has in motion plans to build additional LNG production infrastructures—apart from Bonny LNG, the only one currently in operation—such as the Olokola LNG, the Brass LNG and the Train 7 at Bonny LNG. To make these projects operational, the government must put an end to the constant delays and settle the years-long stalemate over the Petroleum Industry Bill.7 Failing to overcome these obstacles may result in Nigeria losing ground to international competition.

Among the potential major beneficiaries of Nigeria’s strategic shift are Portugal and Spain. While Lisbon and Madrid are already the two largest European importers of natural gas sourced in Nigeria,8 they also belong to the small group of EU countries that do not import Russian gas. Since they don’t depend on energy from Russia, Lisbon and Madrid will have, at least in principle, a greater margin of manoeuvre in fomenting deeper ties between the EU and Nigeria. That will require, however, grand investments in terms of infrastructure construction and development — something which poses a considerable obstacle.9 Equally relevant is the fact that the Nigerian alternative is not risk-free regarding Europe’s goal of attaining energy security, in particular when considering piracy in the Gulf of Guinea and the fragile stability and security in the Niger Delta.10

Gas pipelines across Mediterranean and Sahara. Graphic by Sémhur, Wikipedia Commons.

Despite the focus on LNG, Nigeria also intends to bolster gas exports to Europe by building the Trans-Saharan Gas Pipeline (TSGP) that will connect the Niger Delta — home to the bulk of Nigeria’s gas reserves — to Algeria,11 and on to Europe via already existent gas pipelines. It is estimated that the TSGP will cost US$20 billion. According to the feasibility report, the TSGP will be more competitive than the GNL option, since operational costs will be inferior and waste less natural gas. The report adds that the pipeline’s “critical advantage” is the ability to supply gas to African regions that are often affected by high energy prices and desertification.12

Nevertheless, despite the alleged advantage in terms of costs, the project’s development faces several obstacles. To start with, finding the US$20 billion dollars to finance the TSGP will be a difficult task. Secondly, some militant groups in the Niger Delta oppose the allocation of funds for the project before the economic and social problems in the region are properly dealt with.13 Thirdly, some analysts believe that the quantities carried by the gas pipeline will exceed European demand.14 Lastly, the region through which the pipeline crosses includes extremely volatile centres of instability.15

Adding to these factors, the Russian energy company Gazprom has a stake in the pipeline project. Hence, importing gas via a company in which Gazprom has interests goes against the EU’s goal of reducing dependency on Russian energy.

In short, to diversify energy sources implies widening the number of energy suppliers. As such, Nigeria appears to be a viable option and a potential strategic partner that would contribute to European energy security. In fact, when weighing the variables at stake it becomes clear that the GNL option is more advantageous to Europe than the TSGP. Nevertheless, it would be a mistake to completely exclude from the equation the risk posed by instability in Nigeria. The social and political tensions are far from becoming things from the past. Having said this, the risk factors and the opportunities will not fail to be taken into account by the EU in its interaction with Abuja.

* Published also in Portuguese: Gustavo Plácido dos Santos, “Nigéria: uma fonte alternativa de energia para a União Europeia?” (IPRIS Comentário, No. 13, Novembro de 2014).

About the author:
Gustavo Placido Dos Santos
Portuguese Institute of International Relations and Security (IPRIS)



Sahara gas pipeline gets go-ahead

3 July 2009 BBC

Nigeria, Niger and Algeria have signed an agreement to build a multi-billion dollar pipeline to take Nigerian gas across the Sahara to the Mediterranean.

The giant project, which will cost an estimated $13bn (£8bn), aims to deliver up to 30 billion cubic metres of gas per year for the European market.

France’s Total, Anglo-Dutch firm Shell, and Russia’s Gazprom have all expressed an interest in investing in the scheme.

The pipeline will run for 2,580 miles (4,128km) through the three countries.

BBC Africa analyst Richard Hamilton says that when built, it will be one of the great feats of engineering in the world and dwarf several existing pipelines, such as the one beneath the North Sea.

He says one concern is security, as a pipeline could be a target for Tuareg rebels or al-Qaeda in North Africa, both of whom are active among the unpatrolled expanses and porous borders of the Sahara.

Russian concerns

Energy analysts say there has been interest in this project for many years, but lack of investment and an unclear regulatory environment in Nigeria meant that the plans stayed firmly on the drawing board.

Algerian Energy Minister Chakib Khelil

Algeria’s energy minister says funding will not be a problem

European Union nations now hope it will enable them to diversify their gas supplies – and most pressingly, reduce their reliance upon Russian gas – but many analysts say Gazprom may have a head start in participating in the scheme.

This is because only last week, Gazprom signed a separate $2.5bn deal with Nigeria’s state-owned gas firm NNPC to build new gas refineries, pipelines and power stations in Nigeria.

European Union states are keen to reduce their reliance upon Russian gas because of Gazprom’s numerous price disputes in recent years with Ukraine.

These rows have seen Gazprom temporarily cut supplies to Ukraine, which in turn has reduced Russian gas deliveries to western Europe that are piped through Russia’s neighbour.

“We have the expertise and I don’t think there is a problem with finance in this project,” said Algerian Energy Minister Chakib Khelil.

Nigeria has estimated natural gas reserves of 180 trillion cubic feet, the seventh-largest in the world.



Gazprom International Website | Nigeria

The Federal Republic of Nigeria is a country in West Africa. The country borders with Niger, Benin, Cameroon and Chad. It is a member of the British Commonwealth. Nigeria has a total area of 923,800 sq. km. It is the most populous country in Africa with a population of 134 million people. The capital of Nigeria is Abuja. However, the main city and the true capital of the country is Lagos. Other large cities include Kano, Ibadan, Kaduna and Port Harcourt.

In January and February 2009, VNIIGAZ gave a presentation to the Nigeria Gas Company, the Nigerian Electricity Holding Company, the Nigerian National Petroleum Corporation, the Nigerian Ministry of Energy, the Economic Community of Western African States (ECWAS) and also to the council for the development of the oil-and-gas industry in the state of Umo.

In 2009, an agreement was reached which was discussed a year earlier on the creation of a joint Russian-Nigerian venture between Gazprom Oil and Gas Nigeria and the Nigerian National Oil Corporation.

In setting up the joint venture, Gazprom Oil and Gas Nigeria and the Nigeria National Oil Corporation created NiGaz Energy Company Limited during the official visit of the President of Russia to Nigeria on 24th June and its aims and objectives which were laid down and documented in a Memorandum of Mutual Understanding of 3rd September 2008 have been put into practice.. The first meeting of the Board of Directors of the joint venture took place in October 2009 and a list of priority projects to be implemented as soon as possible was drawn up. Among these projects is the organisation of uninterrupted gas to power stations in the state of Akwa Ibom and a gas energy project in the state of Gombe.

In October 2009, Gazprom Oil and Gas Nigeria in cooperation with the Nigerian company Oanda Plc took part in a tender for the Calabar-Adzhaokuta gas pipeline, with a length extending for 491 km, –a diameter of 1,400 mm and with a capacity of up to 15 billion cubic metres of natural gas per year. This pipeline is seen as the first link of the planned trans-Saharan gas pipeline and is designed to transport natural gas from the gas-rich south-eastern regions of Nigeria to the northern parts which are relatively poor in terms of energy.

Gazprom Oil and Gas Nigeria is not only expanding its business in exploration. During 2009, negotiations were conducted with the Rivers State Administration concerning the construction of a mini plant for producing absorbents for oil spill response.

In October 2009, the company Geodata Technical Services Limited was established – a joint venture between Gazprom Oil and Gas Nigeria and the Nigerian company Geokinetik.  Gazprom Oil and Gas Nigeria’s share is 51%. The joint venture partner, Geokinetik, the market leader in exploration and geological surveying in Nigeria, is providing services for seismic surveying onshore.

Geodata TSL was created to meet demand in the growing market in the processing of geological (seismic) data in Nigeria and also to satisfy the needs of the companies it has set up in services such as the planning, seismic surveying, processing and reprocessing of seismic data, processing well data, secure storage of large data sets, recommendations regarding asset swap deals, entering into new assets, comprehensive studies of geological data, model building, report writing, expert opinions, etc. It is planned that Geodata will become a regional centre for the expert examination and processing of geological data obtained from the companies in the Gazprom International group in other countries in Africa and Latin America. It is also possible to use specialists to provide advice on a wide range of activities in the field of geological exploration.



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