Bloomberg News

Nigeria May Postpone Gas Pipeline to Europe Amid Price Slump

February 27, 2012

(Updates with price slump in fourth paragraph.)

Feb. 24 (Bloomberg) -- Nigeria, which holds Africa’s biggest natural-gas reserves, is reviewing the viability of a proposed trans-Saharan pipeline to Europe after prices slumped.

“The global market has changed,” David Ige, group executive director of gas and power at the state-owned Nigerian National Petroleum Corp., or NNPC, said in a Feb. 22 interview in Abuja, the capital. “We will build a trans-Nigeria anyway and we will build it with a view to continue trans-Sahara if the market supports it.”

Nigeria is looking for export outlets for its gas production, which more than doubled in the last decade. The country has expanded shipments of liquefied natural gas in the period, supplying markets including Japan, India and Portugal.

The plan to build a trans-Saharan pipeline across the Mediterranean to Europe was put in place in 2009, when Nigeria signed an accord with northern neighbors Niger and Algeria. U.S. natural gas slumped 21 percent the next year, followed by a 32 percent drop in 2011.

Nigeria will proceed with a 1,340 kilometer (832 mile) gas pipeline running from Calabar in the country’s southeastern corner, to Kano, the biggest city in the north. It won’t be completed until after 2015 as the government seeks investors, said Ige. “It’s an expensive project and the government is stretched,” he said. “The government is not saying it won’t fund, but it cannot fund the totality of it.”

Finding Investors

NNPC expects it will take two months to be sure its financing assumptions are correct and is working with the West African nation’s Electricity Regulatory Commission, Ige said.

“We want to be sure that they can afford it and if they cannot then we need to go back to government,” he said. “Once we’re done with that and we can put a bankable template we think getting investors won’t be difficult.”

Nigeria plans to borrow $7.9 billion from lenders including the World Bank, Islamic Development Bank and Export-Import Bank of China, for oil and gas pipeline projects to increase crude output and boost the supply of gas to new power stations, President Goodluck Jonathan’s office said Feb. 14.

Decoupling Gas

All of Nigeria’s current gas reserves were found while searching for oil, according to the petroleum ministry. The government wants to create incentives for energy companies to explore specifically for gas, according to Ige.

“We’re expecting gas to completely decouple from oil in terms of investment, so right now we are having a lot of new players, who are not like the majors,” he said. “The majors are more oil-centric and they’ve not had the kind of attention to gas. Now we’ve having people whose assets are more dominated by gas assets and as such are more willing to take it.”

OAO Gazprom, Russia’s gas export monopoly, hasn’t made any investments yet, after signing an agreement in 2009 to form a company called NiGaz Energy Co. Ltd. to invest in production, transportation and infrastructure in Nigeria, Ige said.

“We have a joint venture between NNPC and Gazprom which is just about figuring out what areas to zoom in on, but nothing concrete yet,” he said.

Vladimir Ilyanin, chief executive officer of Gazprom’s Nigerian unit, said in November 2010 that the Russian state- owned company would delay plans to invest billions of dollars into the country until an oil and gas regulation bill is passed.

The government will present a draft Petroleum Industry Bill to the parliament before the end of the first quarter, to replace an earlier draft criticized by energy companies for its fiscal provisions, Petroleum Minister Diezani Alison-Madueke said Feb. 21. The bill will probably be passed this year and may have better fiscal terms for the gas industry, Ige said.

--Editors: Rachel Graham, Matthew Brown

To contact the reporter on this story: Chris Kay in Abuja at

To contact the editor responsible for this story: Gavin Serkin at

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