BusinessDay... the voice of business: FG’s directive, gas policy may stall Gazprom’s N315bn deal

FG’s directive, gas policy may stall Gazprom’s N315bn deal
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EJIOFOR ALIKE on 15 January, 2008 01:00:00
 
The problem may stem from Yar’Adua’s position that companies venturing into
gas production should reserve some gas for supply to the domestic market.
A source at the Nigerian National Petroleum Corporation (NNPC), who was privy
to the meeting with the Gazprom delegation told Business Day on condition of
anonymity that the Russians were not very receptive to Yar’Adua’s position.
The source said that the Gazprom delegation had expressed concerns over a
recent directive by President Yar’Adua that oil and gas companies operating in
the country must supply a portion of their gas output to the domestic market.
According to him, the Gazprom delegation was worried over the profitability of
supplying gas to the local market, given the fact that the government subsidises
the prices of domestic gas.
“What they (Gazprom) are asking for is impossible,” he said, without giving
further details.
He also disclosed that the discussion was being hindered by the government’s
decision to review existing production sharing contracts (PSCs) and the fact
that most of the country’s proven gas reserves have already been awarded to
interested investors.
“Government is currently reviewing all the PSCs to make specific policies on
gas, as the current PSCs are only concerned with crude oil exploration and
production,” he said.
According to him, this has constituted an obstacle to the FG-Gazprom gas talks.
He also spoke on the concern by the Russian team that the government has
already awarded all proven gas reserves to investors.
According to him, this may leave Gazprom with the less favourable options of
buying proven gas reserves from other foreign firms or bidding for less
prospective exploration blocs that are still available, and then start drilling.
Gazprom officials, he said, were worried that the $2.5-billion may not be
sufficient to pursue any of the two options, in view of the crisis in the
sector, which they said has increased the cost of doing business in the Niger
Delta.
He disclosed that Gazprom also has the option of persuading the government to
relinquish some of its equity in gas projects, but added that the government was
not willing to relinquish part of its stake to any foreign investor.
The Federal Government through the NNPC controls majority interests in gas
projects.
A Gazprom delegation had earlier visited the country in December to explore
opportunities of its participation in the country’s gas sector.
Gazprom spokesman, Sergey Kupriyanov, was quoted as saying that the Russian gas
company was keen to develop Nigeria’s abundant gas resources.
“We are interested in Nigeria, and the talks are under way,” he said.
Business Day gathered that the company has the technology to build gas
gathering facilities
Gazprom has offered to invest up to $2.5-billion for the development of the
country’s natural gas sector, with an initial investment of at least $1-
billion.