NIGERIA - China Eyes Gas E&P.
During President Obasanjo's visit to Beijing and after talks with Chinese President Hu Jintao, the two states on April 14 signed five economic agreements. One of them was to focus on gas E&P operations to be launched in Nigeria by Chinese companies.
China, running low on oil resources and the world's fastest growing energy importer, is making a great effort to seek overseas supply sources. The country's three state-owned giants - China National Petroleum Corp. (CNPC), China Petroleum & Chemical Corp. (Sinopec), and China National Offshore Oil Corp. (CNOOC) - have all entered Nigeria's oil sector. Sinopec has stakes in three oil blocks in Nigeria, with one of the them producing 4,000 b/d of crude oil. CNPC, the parent of PetroChina, has entered Nigeria's oil E&P sector. CNOOC is providing oilfield services in Nigeria. If realised, the planned growth in China's involvement in Nigeria could dent oil majors' dominance in the country's upstream petroleum sector.
The Chinese companies have agreed to invest in Nigeria's refining and IPP businesses. In return, they expect preferential treatment in the award of E&P blocks by the DPR.
South Korea, as potentially Japan, is also in Nigeria's sights for involvement in the country's oil and gas E&P as well as the downstream sector. Overtures with these two countries, as well as with India, Australia and Malaysia, have been made in the more recent months. India's state-owned ONGC Videsh Ltd. (VOL) in late July bid for four offshore oil and natural gas blocks in Nigeria.
Major signature bonuses have been asked for the deep-water blocks. Although the DPR sets the rules and issues the licences, NNPC does the negotiating with the bidders through its upstream arm, National Petroleum Investment Management Services (Napims).
Sao Tom and Principe, where mediation helped end a coup in July 2003, are jointly exploiting nine potentially lucrative offshore E&P blocks. The governments of Sao Tome and Principe (STP) and Nigeria had by then set up the Joint Development Zone (JDZ), overseen by the Joint Development Authority (JDA) which i based in Nigeria. Oil income from the JDZ will be shared 60% by Nigeria and 40% by STP. This is based on an agreement signed on Feb. 21, 2001.
On March 17, 2003, Environmental Remediation Holding Corp. (ERHC) announced the signing of a memorandum of understanding (MoU) with STP settling all outstanding disputes. ERHC thus increased its rights to participate in the JDZ from a 30% working interest in two blocks to a total of 125% working interest spread over six blocks. Additionally, ERHC was not required to pay signature bonuses on four of the blocks. In exchange, ERHC relinquished its rights to an overriding royalty interest, share of signature bonus and share of profit oil in the JDZ.