Nigerian needs come first as oil majors' role shrinks

Sep 30, 2005 02:00 AM

Nigeria will put its national interests first in considering investment plans of multinational oil companies, whose importance to the global energy industry is shrinking, said Nigeria's junior Oil Minister Edmund Daukoru.
The hydrocarbon-rich West African country's plan to eliminate pollution from gas burned off during oil production remains on target, but Nigeria won't achieve its aspiration of growing domestic refining capacity enough by 2007 to refine half of the country's production, Daukoru said on the sidelines of the World Petroleum Congress.

The country's domestic refining capacity is about 445,000 bpd, though its current refining output is below that level. On the other hand, Nigeria produces about 2.5 mm barrels of crude oil a day, so new refineries must be built there, he said.
"The majors will go for economies of scale, and they would like to produce a product that is acceptable globally," Daukoru said. "That kind of project takes three years minimum, so if we say we want to refine half of production by 2007, physically it is not possible."

If Nigerian businesses have the capital and expertise, the government will encourage them to invest in the country's energy resources and refining capacity, Daukoru said.
"We must have a two-track policy to encourage others than the majors alone, because their role in the world is shrinking," Daukoru said. "We must also encourage other people -- independent, local entrepreneurs -- to form alliances that can also step into the breach."

Daukoru welcomed investors who propose infrastructure development alongside oil and gas production. It's also imperative that Nigeria use its energy proceeds to add value by providing training to its citizens and diversifying its economy, he said.
"We are not playing to the satisfaction of Western countries. They look after their own national interests; we look after ours," he said.

But Nigeria is eager to talk about development projects with Western oil and gas companies if they're able to help the nation meet its objectives.
"Majors have never been involved in anything other than producing oil and gas, " Daukoru said. But, "if a partner comes and wants to be involved in development of Nigeria infrastructure, I'm bound to listen to them," Daukoru said. "I challenge them to put me to the test."

Most foreign investors, however, remain cool to the idea of developing refining capacity in a nation that subsidizes gasoline and regulates the price paid at the pump. That has left Nigeria, a crude-oil exporter and member of OPEC, dependent upon imports of refined products for much of its fuel needs. The government has tried to implement measures to deregulate its gasoline market, but a backlash in the form of strikes and civil unrest has shelved those plans.
"The ultimate aim remains the deregulating of gasoline, but civil society itself does not always help," Daukoru said. "As it stands now, it is part of the local politics, and the government cannot be insensitive to the political aspects of it,as desirable as the commercial aspects are."

Source: Dow Jones Newswires
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