Will Saudi Arabia’s current moves for the same petrochemical plants and other
assets create what could be best described as the mid-far East Scramble for
Nigeria?
Oil and gas firms from the People’s Republic of China (PRC) are currently in a secret plot to hatch a far-reaching agenda aimed at acquiring a broad spectrum of state-owned Nigerian oil and gas assets, Valuechain can authoritatively report.
Very high level sources in the Nigerian Ministry of Petroleum Resources confirmed that Chinese companies in question are interested in the combined acquisition of pipelines, refineries, and also in the exchange of crude oil grades between Nigeria and the Republic of Niger through a mutually satisfactory barter arrangement.
Their interest in crude oil exchange between Nigeria and Niger Republic indicates that the brown and green field refineries, which are respectively located in Kaduna (presently) and Katsina (future), will be their most likely targets for acquisition and operation.
According to Valuechain investigations, negotiations that will make it possible for these oil and gas deals to go through are being perfected between Nigeria and China at the highest level of government to government interface, alongside the private Chinese firms that will actually acquire and operate the Nigerian petroleum assets under review.
“The Chinese Ambassador to Nigeria had gone to China in March 2019 to hold meetings with the parties involved in the talks for acquiring these oil assets and returned back to the country in the first week of April.
“He was actually billed to return on April 5, 2019 to Abuja, which coincided with the same day that the Nigerian side and a few Chinese Embassy staff held a meeting at the Foreign Affairs Ministry under directives from Geoffrey Onyeama, the Nigerian Minister of Foreign Affairs,” Valuechain gathered from a very highly placed source in the Ministry of Petroleum Resources.
Investigations conducted by Valuechain authoritatively confirmed that Eng. Rabiu Suleiman, who is the Senior Technical Assistant on Refineries and Downstream Infrastructure to Dr. Emmanuel Ibe Kachikwu, the Minister of State for Petroleum Resources, was billed to be part of the meeting at the Foreign Affairs Ministry.
However, he was unavoidably absent because, at the time of the meeting in Abuja, he was rather attending the Nigerian Oil and Gas Opportunity Fair (NOGOF), which was held in Yenegoa, the Bayelsa State capital between April 4 and 5, 2019.
Before the Chinese Ambassador’s trip to his country, it had been agreed that the relevant authorities from both Nigeria and China would meet again in an expanded but yet secret session in the second week of April after the Ambassador’s return from the world’s most populous nation and largest market.
In other words, the Ambassador’s visit to his home country in March and the secret meeting in Nigeria, which was held on April 5 and made up of people from the Foreign Affairs Ministry, the Petroleum Resources Ministry, and some diplomats from the Chinese Embassy in Abuja were all mutually linked activities in preparation for a joint and bigger meeting between representatives of Nigeria and China in the second week of April.
According to Valuechain findings, the higher level and more expanded meeting between Nigeria and China that would follow after the Abuja secret talks was to be held in Dubai and was tentatively fixed for April 8.
“The Chinese Ambassador to Nigeria was directed to go and fix an appointment with the business interests in his country during a previous meeting held in South Africa, which he was part of and travelled to China for that purpose during the Chinese New Year, that suggested that the Chinese New Year was over and he was coming back to Nigeria, April 5.
“We also suggested to him to attend a meeting with the interested parties in the second week in April and one company had been brought to terms and they were ready for negotiations and we would have to do that in Dubai, but we had to confirm the possibility of the date from the Chinese Ambassador to Nigeria because we didn’t want to go twice.
“Already there was a meeting in Abuja at the Foreign Affairs Ministry, April 5, and one ambassador had been directed by the Foreign Affairs Minister to follow up with the Chinese Embassy and they fixed a meeting for April 5. So if they were done with the meeting, they would extract the date for the meeting in Dubai in the second week of April,” said an official from the Nigerian Ministry of Petroleum Resources.
Petroleum Minister
The Chinese secret agenda came just at the same time that the government of Saudi Arabia was making frantic efforts to acquire either brown field legacy assets or build new ones in green field situations in the Nigerian oil and gas industry.
With these parallel developments being pursued by the two middle and far East economic giants, a picture is seemingly being painted of an Asian scramble for Nigerian energy resources.
On April 24, the Minister of Energy, Industry and Mineral Resources of the Kingdom of Saudi Arabia, H.E. Khalid bin Abdulaziz Al-Falih, expressed the strong readiness of his country to sign a Memorandum of Understanding (MoU) with Nigeria in order to pave way for the partnership investment in the nation’s oil and gas sector. The Saudi Minister was speaking during a high level bilateral meeting with Nigeria’s Minister of State for Petroleum Resources, Dr. Emmanuel Ibe Kachikwu, in Riyadh.
While stating that his team will undertake the task of drafting an outline of the MoU in consonance with Nigeria and consequently move through the bureaucratic channels of getting the requisite approvals and endorsements, it was also revealed that, Eng. Adeeb Y. Al-Aama (Saudi Arabia) and Dr. Omar Farouk Ibrahim (Nigeria), who are Governors of the Organization of Oil Exporting Countries (OPEC) for the two countries, have already been nominated to fast track the process for official endorsements and signing at the highest level of government and political responsibility.
The agreement in view is expected to, in principle, open doors for Nigeria to potentially benefit from Saudi Aramco’s recent aggressive oil sector investments across the globe. The Saudi Arabian proposal also includes areas of interest covering existing refinery revamp, building of brand new refinery, LNG investments and product supply trading in crude and refined products. H.E Khalid Al Falih also reiterated the possibility of establishing an independent refinery in Nigeria as the country considers Nigeria as the best hub to reach other African countries.
Dr. Kachikwu, who led a high powered delegation drawn from the Ministry of Petroleum Resources, Nigerian National Petroleum Corporation (NNPC), Department of Petroleum Resources, Petroleum Products Pricing Regulatory Agency and Petroleum Equalization Fund for an exploratory visit to Saudi Arabia at the invitation of his Saudi counterpart, H.E. Khalid Al Falih, disclosed that Nigeria aims to leverage on the huge success of the Saudi Government in the sector , likely due to the fact that the Saudi Aramco’s turnover in the year 2018 was over $200 billion.
He also visited the Jubail Industrial City, where the President of the Royal Commission for Jubail and Yanbu (RCJY), Eng. Abdullah bin Ibrahim Al-Saadan, and his strategic team took the Minister on a tour of the gigantic project complex, where Dr. Kachikwu expressed his anticipation for a replication of the innovative project in the ongoing Oil and Gas Industrial Park in Nigeria being championed by the Nigerian Content Development and Monitoring Board (NCDMB).
At the Saudi Basic Industries Corporation (SABIC), the visit presented an opportunity for the Chief Operating Officer, Refineries and Petrochemicals of NNPC, Mr. Anibor Kragha, and the Senior Technical Adviser to Nigeria’s Petroleum Minister on Refineries and Downstream Infrastructure, Mr. Rabiu Suleiman, to deep-dive into issues of shared interest with SABIC.
Then, at the National Industrial Development and Logistics Program (NIDLP) Centre, considered to be the most ambitious, innovative and most impactful programme under Saudi’s Vision 2030, Dr. Kachikwu was intimated that the core objective of the Programme is to position Saudi Arabia to become Global leaders in the areas of Mining, Energy, Logistics and Industry.
Clearly reflecting the bold ambitions of the “Project100” initiated by Dr. Kachikwu and incubated by the NCDMB, it was highlighted as a shared interest for both nations. This further formed the foundation for the NCDMB boss, Engr. Wabote Simbi, to firm up plans for a proposed technical working visit to the NIDLP Centre.
Whether or not there is a scramble for Nigerian oil and gas installations, what the country has for years been looking forward to is willing investors with private capital that can put in their money to turn the facilities around.
“When I started in 2015, in August, September, October as GMD NNPC and minister of state for petroleum, and I discussed this with the President seeking his approval, one concern was that we did not want to sell the refineries as scrap, we preferred that we repair the refineries, but he also acknowledged the fact that we did not have the resources and so private sector money was essential, but what he wanted us to do was to go out and seek whether people will be interested in providing the financing,” Kachikwu maintained.
In his words, “I did go to India as part of our investment drive and I did go to Italy to ENI and then we signed an MoU that promised investments of about $13 to $14 billion in the Nigerian economy, covering upstream investments, covering refining, and then covering power plants and all that, so this is a global MoU, which is an outstanding agreement or a statement of intent but is meant to channel efforts towards providing investment to this country.”
The Minister was also said to have held meetings at the OTC a few years ago with the president of ENI, where we reached an agreement and they came to Nigeria to see Prof. Yemi Osinbajo, then Acting President, and reached an agreement to do a different green field refinery in Brass of 150,000 barrels per day capacity.
Valuechain learnt that further meetings were later held with these producers and the discussions went in four stages, covering NNPC refineries in Port Harcourt, Warri, Kaduna, and the collocation of refineries, which would place some of those plants where they can share facilities, such as pipelines, power and storage.
Kachikwu has often favoured the idea of building new refineries over sinking money into comatose ones.
According to him, “I think we should primarily focus on green field refineries in those areas so that we are sure of the technology. At the time that I started, virtually nobody was interested in putting financing in this for very many reasons: First, the market pricing of products was a challenge and so nobody was going to put in his money and then get a subsidized petroleum product, you won’t be able to recover your funding.
“Second was the fact that the whole investment climate at the time was very problematic, we all went with my team all over the world trying to sensitize the big refiners, the big refinery owners, and I learnt that the discussion had shifted from who is interested in doing it, how many people, to who are not participating, which means a lot more interest has been gathered and a lot more people are interested in participating.”
Valuechain investigations from the Nigerian Ministry of Petroleum Resources show that what the ministry has succeeded in doing is to ascertain what volume of work is required to be done and how much it will cost, and the total cumulative amount is in the region of $1.1 billion to $1.2 billion within all the refineries.
Now, with the entry of Saudi Arabia into the fray of major nations showing interest in the Nigerian hydrocarbon sector, Nigeria may learn from the biggest OPEC producer’s current investment plans and end up freeing many of its government held oil and gas companies for private ownership.
This may help Nigeria in attracting more foreign exchange that is currently in shortage in the country, resulting in the perennial weakness of the naira against major international currencies, thereby putting a wedge in the way of project financing for the development of critical infrastructure in the oil and gas industry and across the rest of other sectors of the national economy.
In Saudi Arabia, the government wants to boost non-oil revenue by selling stakes in state assets, including Aramco, the stock exchange and soccer clubs. It set up the National Center for Privatization in 2017 and it has been reported that privatizations could exceed $350 billion in about five years. In April 2018, authorities put forward a target of as much as 40 billion riyals or $11 billion by 2020.
The possibility of selling a minority stake in the giant oil company was first mentioned in a newspaper interview published in January 2016 by then-Deputy Crown Prince Mohammed bin Salman, spawning an enormous amount of activity from consultants, bankers, stock exchanges, governments and journalists all competing to benefit from the sale of the century.
Saudi Aramco has reportedly prepared a set of corporate accounts to international standards and commissioned an external audit of its oil reserves ready for investors.
The pending sale had triggered a scramble among stock exchanges, including in the United States, the United Kingdom and Hong Kong, to secure a slice of the listing, with each receiving government backing.
Technical preparations for a sale appear to have been largely completed over the last two years but the actual date for any sale has been repeatedly pushed back, and there is still no timeline for a decision, let alone an actual listing, and the timetable still slipped into 2019.
Saudi policymakers have indicated shares will be listed on the domestic stock exchange but there is no firm commitment to list them internationally.
The government has a range of options, from a domestic-only listing, a private sale of shares to a strategic partner, an international listing, or some combination of any of these three. And it is expected that Nigeria will learn from this and also plan ahead, while making the most of the present opportunities in the international oil and gas market.