July 01, 2009

In the Niger Delta, Gazprom Joins the Fray

Last week Russian gas giant Gazprom and the state-operated Nigerian National Petroleum Corporation (NNPC) agreed to a $2.5 billion joint venture, rather obtusely named NiGaz, to explore and develop Nigeria’s natural gas reserves.  Nigeria has the largest natural gas reserves in Africa, and the seventh-largest in the world, but they are underdeveloped at this point due to issues of security and infrastructure.  Gazprom plans to invest in infrastructure development, including refineries, power stations, and pipelines that could eventually be used to export Nigerian gas abroad.

There are several potential security implications of this deal:

  • Any time you’re dealing with energy in Nigeria, these folks from the Movement for the Emancipation of the Niger Delta (MEND) are going to be a part of the discussion.  Gazprom has an extensive private security outfit, which raises the potential for all kinds of fireworks.  On the one hand, it puts Gazprom in a much better position to defend its pipeline infrastructure than most other energy companies.  But, it could just as easily result in more violence given that it’s impossible to guard an entire pipeline, and MEND is unlikely to take kindly to armed foreign interlocutors in the Niger Delta. A severe uptick in violence could further damage the already reeling oil industry in Nigeria.
  • This arrangement also has the potential to be a boon for the discontented local population in the Niger Delta.  It’s unlikely they’ll see any tangible developmental or monetary rewards, but one of the main problems for local residents has been incessant gas-flaring that has had terrible impacts on local health.  If some of the gas is being piped out instead of flared, it would most likely be a welcome improvement.
  • This deal may ultimately affect energy security in western Europe.  It could mark the first step in the creation of a Trans-Saharan pipeline, which would pipe Nigerian gas up to Algeria and then potentially to western Europe, which is keen to diversify its gas imports away from Russia. This would diversify Europe’s gas sources, sort of.: on the one hand, it would provide gas that wasn’t from Russia; on the other, it would still be coming from a Russian-controlled pipeline.