Identifier
Created
Classification
Origin
02ABUJA2438
2002-08-21 17:41:00
CONFIDENTIAL
Embassy Abuja
Cable title:  

TOP OIL ADVISORS ENTHUSIASTIC ABOUT ENERGY FUTURE

Tags:  EPET ETRD PREL NI 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 03 ABUJA 002438 

SIPDIS


E.O. 12958: N/A
TAGS: EPET ETRD PREL NI
SUBJECT: TOP OIL ADVISORS ENTHUSIASTIC ABOUT ENERGY FUTURE


Classified by Howard F. Jeter, reason 1.5 (b) and (d)


C O N F I D E N T I A L SECTION 01 OF 03 ABUJA 002438

SIPDIS


E.O. 12958: N/A
TAGS: EPET ETRD PREL NI
SUBJECT: TOP OIL ADVISORS ENTHUSIASTIC ABOUT ENERGY FUTURE


Classified by Howard F. Jeter, reason 1.5 (b) and (d)



1. (SBU) Summary: On July 25 Assistant Secretary Kansteiner and
Ambassador
Jeter discussed oil and gas issues with Dr. Rilwanu Lukman, Obasanjo's
Special Advisor
on Petroleum and Energy, and the current President of OPEC. Lukman
denied rumors
that Nigeria will leave OPEC under alleged U.S. pressure, adding that
Nigeria plans to
increase its oil and gas production within OPEC's quota framework.
Jackson Gaius-
Obaseki, Group Managing Director of the Nigerian National Petroleum
Corporation
(NNPC),and Funsho Kupolokun, Special Assistant to the President on
Petroleum
Matters, participated in the meeting. End Summary.


--------------
OPEC: Rumors of U.S. Pressure
--------------



3. (SBU) Commenting on rumors that the United States is pressuring
Nigeria to leave
OPEC, Lukman said the rumors had provoked a $1.50-a barrel drop in oil
prices. These
rumors do not reflect reality, he said, since America receives an ample
supply of oil at an
acceptable price. A/S Kansteiner stated that it was not USG policy to
pressure Nigeria to
quit OPEC. While U.S. policy was against cartels in general, it was
Nigeria's decision
whether to remain in the organization, Kansteiner stressed. The
Ambassador questioned
whether the source of the rumors is a recently released report by the
African Oil Policy
Initiative Group encouraging the United States to import more African
oil, a report that
may have been mistaken as official.



3. (C) Lukman said that Nigeria would not leave OPEC, citing as
evidence the drop in
oil prices caused by the rumored break with OPEC. He asserted that
Nigeria benefited
from its OPEC membership and believed Nigeria would be able to obtain a
larger OPEC
quota in the near future. Lukman said the NNPC and its partners can
easily augment
production by a million barrels a day. According to Lukman, Nigeria's
ability to increase
its production will allow the country to export more oil through the
OPEC framework,
with anticipated cooperation from Mexico, Norway, and Oman. (Comment:
Lukman is
not the only one worried about reports on Nigeria's alleged plans to
leave OPEC. The
Venezuelan Charge recently told the Ambassador that President Chavez

had called him in
a near panic about Nigeria's rumored OPEC departure. The Charge said
he assured his
President there was nothing to the rumor but that personally he thought
the Nigeria would
leave OPEC sooner rather than later. There were too many compelling
domestic
economic demands on the Nigerian Government, the Charge said, for
Nigeria to stay
within the bounds of the OPEC quota system. End Comment)



4. (C) As President of OPEC, Lukman expressed concern about Russia and
called it the
"wild card" in the OPEC equation. Lukman suspects Russia, despite its
recent
commitment to synchronize its production policy with OPEC, may not
cooperate in
keeping prices within acceptable limits. Lukman said OPEC producers
may consider
augmenting production at their September meeting should U.S. economic
activity pick
up. OPEC members are committed to "keeping the price right" and
delivering ample
supply to their customers, he said, even if the problems in the Middle
East persist.


--------------
Future Production Plans
--------------



5. (SBU) Focusing on Nigeria's contribution to world energy supply,
Lukman discussed
his country's plans to widen its energy base through continued
exploration and capacity
building. He said the NNPC is well positioned to take advantage of the
world's
increasing demand for energy, and foresees many opportunities for
Nigeria to expand its
share of the international oil and gas markets.



6. (C) Kansteiner asked Lukman's opinion on the oil development
potential around Sao
Tome. While he sees potential for increased oil production in that
region, Lukman said
most of the oil is located at such depths that technological advances
will be required
before oil can be efficiently produced. Nigeria and Sao Tome plan to
solicit bids for nine
deepwater blocks in the Joint Development Zone.



7. (SBU) Lukman focused on Nigeria's developing gas resources. Although
Nigeria
depends heavily on oil today, he is optimistic that Nigeria will yet
earn as much revenue
from gas as it does from oil. Lukman emphasized that natural gas
exploration was a high
priority of President Obasanjo and that, in fact, it was Obasanjo who
had converted him
to believing that gas had as much revenue generating power as oil did
for Nigeria.
Lukman believes it is only a matter of time before Nigeria, the world's
tenth largest gas
exporter, amasses the necessary financial and technical ability to
become one of the
biggest exporters of natural gas. Lukman is satisfied with the
progress of new gas
projects, including Shell's floating gas facility, scheduled for
completion in 2008, and
ExxonMobil's facility, scheduled for 2009.



8. (C) Gaius-Obaseki said the United States is the market of choice for
Nigeria's gas
exports because of high prices. Kansteiner replied that increasing
demand and new
infrastructure will transform the United States into an even more
attractive outlet. While
Gaius-Obaseki acknowledged that the United States will remain an
important market, he
said the NNPC wants to diversify its market.



9. (SBU) Lukman anticipates that West Africa will become a significant
natural gas
market serviced via the West African Gas Pipeline, scheduled for
completion in 2004.
Lukman believes construction is moving forward. Farther in the future,
Nigeria itself
will consume more gas through a trans-Nigerian pipeline. Years ago,
the GON
considered building a pipeline to service the entire country, but the
project was not
economically viable. Higher world gas prices may warrant
reconsideration of the project.


-------------- --------------
Delta Security and American Investment
-------------- --------------



10. (SBU) Kansteiner raised concerns held by American oil companies.
Alluding to the
recent occupation of Chevron's facilities in the Delta region by
disaffected women,
Kansteiner wondered whether security concerns will deter investors from
Nigeria.
Lukman replied that oil firms will continue to invest in Nigeria since
it is likely that
stability will take hold in the Delta region. Lukman nonetheless
acknowledged that
security agencies must be prepared to manage difficult situations.



11. (C) Kansteiner mentioned another concern, the lack of provisions
in production-
sharing contracts, the agreements governing the deepwater oil blocks,
specifying which
party or parties own the gas development rights. Gaius-Obaseki
acknowledged the
omission, but added that terms can be negotiated on a case by case
basis. Kansteiner
inquired about Nigeria's delay in approving the recent ChevronTexaco
merger. Lukman
replied the government is addressing this situation.


--------------
Comment
--------------



12. (C) Comment. Lukman's statements about Nigeria's production plans
parallel
information the Embassy and the Consulate has received from the oil
companies; they
expect Nigeria to develop a four million barrels a day production
capacity by 2010.
(However, this production measure is dependent on the GON's ability to
invest in the
additional capacity. Also, it depends on the economic utility of that
added capacity. It
would make little sense to sink money into additional production if you
cannot sell the
additional amount due to OPEC production quotas. Lukman expressed
confidence in
Nigeria's ability to increase its production through a larger OPEC
quota. As we have
previously reported, should Nigeria not obtain a larger dispensation,
over time its
production will most likely exceed the current one, as it has in the
past.



13. (C) Lukman downplayed the seriousness with which ChevronTexaco
views the
GON's delay in approving the ChevronTexaco merger. The company
contends that it has
followed the law and notes that Nigeria is the only country in which it
is having
problems. Mission will continue to work toward a resolution of this
issue. End
Comment.



14. (U) Assistant Secretary Kansteiner did not see this message prior
to his departure.



15. (U) Drafted: Econ/Lagos: Melissa Cline


JETER