As he held meetings, last week, with Alexis Tsipras and Panagiotis Lafazanis, Greek Prime minister and energy minister respectively, keen observers of the European energy sector could almost place a bet on the fact that Alexei Miller, chief executive, Gazprom, the Russian gas giant, was not particularly a happy man.
And the reason for this is not far-fetched. It is mainly because the European Union, EU regulators on Wednesday, April 22, formally charged Gazprom with abusing its dominant market position in Europe, a move that risk inflaming tensions with Moscow.
The charges jump-start a case against the state-controlled energy company, which the EU has long suspected of abusing its dominant position in some eastern and southern European countries.
When it launched the probe, the Commission said it suspected Gazprom of unfair behavior in three areas: preventing some countries from re-exporting gas they have bought from the company; tying some aspects of its contract with customers – such as the price it charges for gas – to cooperating in other business areas including the building of new pipelines; and tying the price it charges for gas to international oil prices.
For instance, Lithuania had complained that it faced higher prices than its neighbors due to its decision to force Gazprom to sell its stake in the country’s pipeline network. It lodged a formal complaint with the EU Commission on Gazprom’s pricing in 2011. Other countries, including Poland, have also voiced concerns over the Russian company’s practices.
But countries that cooperated with Gazprom on a now-abandoned pipeline project known as South Stream, meanwhile, were given more favorable prices.
Gazprom has, however, denied any wrongdoing, accusing the EU Commission of simply seeking to interfere in commercial contracts.
Europe is Gazprom’s most lucrative market, and the company accounts for around one-third of EU gas imports, making it the largest outside supplier. Some countries in the Baltics and southeastern Europe rely entirely on shipments from the Russian company.
But all of that now appears threatened with the latest developments most of which were precipitated by the current standoff between Russia and Ukraine.
So could Russia’s loss turn out to be Nigeria’s gain especially at this time when the country is faced with dwindling revenue from crude oil export?
Experts say maybe yes. Nigeria was the world’s fourth biggest exporter of liquefied natural gas as at 2012 but it’s struggling to meet local demand for the fuel used by plants that generate at least 70 per cent of the country’s electricity needs.
But to fully take advantage of the ongoing situation in Europe, the nation, which holds Africa’s biggest gas reserves of more than 180 trillion cubic feet, first needs to expand pipeline networks not only to service power plants and industries but also for export.
In the meantime, natural gas production in Nigeria is constrained by the lack of infrastructure to monetize the gas that is currently being flared. Sadly, natural gas flared in Nigeria accounted for 10 per cent of the total amount flared globally as at 2011.
Gas flaring in Nigeria has decreased in recent years, from 540 billion cf in 2010 to 428 billion cf in 2013. There are a number of recently developed and upcoming natural gas projects that are focused on monetizing the natural gas that is currently being flared in the country.
International oil companies, which had been export-focused due to low domestic gas prices fixed by the government, have agreed to sell off $10 billion of assets over the past three years. Those assets are largely being taken over by local companies, such as Seplat Petroleum Development Co. and Midwestern Oil and Gas Co. Ltd. Oando’s $1.65 billion acquisition of ConocoPhillips’s Nigerian oil and gas assets in June made it the country’s biggest indigenous gas producer, with a production of more than 50,000 barrels of oil equivalent.
The Nigerian government also needs to increase prices of gas to serve as an incentive for local players in the oil and gas sector to participate. An oil and gas player says investments are needed to explore for more gas, set up five processing facilities at about $2 billion each and develop domestic distribution channels.
Nigeria is the largest holder of proved natural gas reserves in Africa and the ninth-largest holder in the world. Nigeria produced 1.35 Tcf of dry natural gas in 2013, ranking among the world’s top 30 largest natural gas producers.
The country exported about 800 billion cf of LNG in 2013, accounting for about 7 per cent of globally traded LNG and ranking Nigeria among the world’s top five LNG exporters. Japan is the largest importer of Nigerian LNG and received 23 per cent of the total in 2013.
European customers have in recent years squeezed discounts from Gazprom amid competition from liquefied natural gas deliveries and cheap American coal shipments to power producers. So Nigeria should go for those customers within Europe, where the commission has been working to reduce the EU’s dependence on Gazprom and Russia.
Nigeria also needs to revive the Trans-Saharan project which, when completed will transport about 30 billion cubic meters of natural gas from Warri region through Niger to North Africa’s Algeria northwards to Spain and Europe.

Uzo Nzeogu
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