RusEnergy

June 26 2009 Financial Times by Matthew Green – Gazprom, the Russian gas group, has signed a deal to invest at least $2.5bn in a joint venture with Nigeria's state-owned oil company to explore and to develop the country's vast gas reserves. Dmitry Medvedev, Russia's president, said during a visit to Abuja, Nigeria's capital, that he hoped the nations would become "major energy partners". "If we carry out all our plans, Russian investment in Nigeria can reach -billions of dollars," Mr Medvedev said late on Wednesday. The formation of the 50-50 joint venture between Gazprom and the Nigerian National Petroleum Corporation (NNPC), named Nigaz, follows a prolonged courtship by Russia which began under Vladimir Putin, the previous president and current prime minister. Gazprom's action to secure a foothold in a country where western groups have led the development of the oil industry for the past half century has given rise to concerns in Europe that Moscow is seeking to gain control of Nigerian reserves to tighten its grip on the the European Union's gas supplies. European governments see Nigeria's gas reserves - the seventh-largest in the world - as a potential route to diluting their reliance on Russia, which supplies up to half the gas consumed by the EU. Nigeria has struggled to develop its gas industry to anything like its full potential, due in part to its failure to come up with the viable regulatory framework and pricing mechanism needed to spur commercial investment. The government of Umaru Yar'Adua, Nigeria's president, has designed a "gas masterplan" which intends to prioritise gas for domestic use to supply industries and tackle Nigeria's chronic power crisis. Implementation has been slow and some experts question whether the regulatory approach envisaged in the plan is viable. Gazprom has nevertheless signalled its intention to help Nigeria realise its ambitions to develop domestic gas infrastructure. The Nigaz joint-venture intends to explore for gas and build refineries, gas pipelines and gas-fired power stations throughout Nigeria, including a section of pipeline that could form part of a proposed trans-Sahara pipeline to export gas directly to Europe. "We will take part in building the first segment of gas pipeline from southwestern Nigeria northwards," said Boris Ivanov, head of Gazprom International. "If [the] trans-Sahara pipeline is realised, it will be its first segment." Capital costs are estimated at $10bn (€7.2bn, £6.1bn) for the trans-Sahara pipeline and $3bn for gas gathering centres. The proposed 4,128km pipeline from Nigeria via Niger and Algeria would send up to 30bn cubic metres of gas a year to Europe. The EU has pledged political and economic backing for the trans-Sahara pipeline. But a consortium has yet to emerge to fund and build the project. Total, the French energy group, this year said it would be willing to participate in the project .