LONDON (Dow Jones Newswires), Jan. 19, 2009
A huge infrastructure deal between Nigeria and Dubai will target $16 billion worth of investment over the next decade in oil and natural gas drilling and the country's dilapidated power sector, Nigeria's state petroleum company said Monday.
The deal, many details of which have yet to be hammered out, could be a boon to the impoverished West African nation where past and present governments have long been unable to meet its population's basic development needs, like reliable electricity supplies.
The planned investment comes at a time when tumbling crude prices are putting stress on Nigeria's oil-dependent economy and signals a willingness of the Dubai government to seek investment deals further afield as Gulf opportunities dry up amid the global financial meltdown.
An official with the Nigerian National Petroleum Co. said the deal involved Dubai Natural Resources World teaming up with the state-run NNPC to bankroll new oil and gas drilling projects and build at least 1,000 megawatts of gas-fired power generation.
"This would be across the board energy infrastructure projects. Dubai wants to help us do things that other (international oil companies) haven't been willing to do," the official, speaking on condition of anonymity, told Dow Jones Newswires.
Dubai Natural Resources World, a unit of state-owned investment arm Dubai World, confirmed the agreement in a statement at the weekend.
The deal also envisages building new pipelines to distribute gas to areas cited for planned industrial activity and possible investment in liquefied natural gas facilities, the official said.
But there are a host of uncertainties over the deal, including how Dubai will finance its planned investments. Militant violence also continues unabated in Nigeria's main oil and gas producing region, which has hobbled energy projects over the past three years.
Dubai, one of seven emirates that comprise the United Arab Emirates, has been rocked by the financial crisis and credit-rating agencies have slashed their outlooks on a number of Dubai-controlled entities, including property developers.
Nigeria is one of Africa's biggest oil producers, and has the world's seventh biggest proven natural gas reserves but it has a poor track-record of developing those supplies.
For decades, foreign companies working with the NNPC have flared off most of Nigeria's oil-associated gas because the domestic market was small with few industrial and retail consumers.
This has started to change in the past decade with the building of terminals that liquefy natural gas for export on tankers bound for Europe and the U.S.
Foreign oil companies have resisted investing more in Nigeria's domestic gas and power infrastructure, in part because of low gas prices set by the government. It's unclear if Dubai will get any financial breaks on its gas and power investments because of the country's low energy retail prices.
Copyright (c) 2008 Dow Jones & Company, Inc.
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