REP. JEFFERSON'S MEETING WITH NNPC MANAGING

UNCLAS SECTION 01 OF 02 ABUJA 000275

SIPDIS

SENSITIVE

E.O. 12958: N/A
TAGS: PGOV EPET NI
SUBJECT: REP. JEFFERSON'S MEETING WITH NNPC MANAGING
DIRECTOR KUPOLOKUN


SENSITIVE BUT UNCLASSIFIED, NOT FOR PUBLICATION ON THE
INTERNET OR INTRANET.


1. (SBU) Summary. Nigeria National Petroleum Corporation
(NNPC) Managing Director Funsho Kupolokun said February 16
that he has given cautious encouragement to two petroleum
sector projects that could be potentially profitable for U.S.
investors: a joint oil delivery system for marginal oil
fields in Southeast Nigeria, and a liquefied natural gas
(LNG)-based fertilizer plant in the Southsouth. He added
that the NNPC is looking for financial incentives to bring in
LNG sector investors, but there is little the NNPC can do for
the U.S. contractors hurt when Shell downgraded its petroleum
reserves. Rededicating himself to NNPC's reforms, Kupolokun
told visiting Rep. Jefferson that NNPC would continue its
push for upstream Nigerian producers, downstream
deregulation, and at least one working refinery by year's
end. End Summary.

An Opportunity on the Margins
--------------


2. (U) NNPC Managing Director Funsho Kupolokun met with
Congressman William Jefferson, Stolt Oil representative Jim
Creaghan, Verizon representative Levin Custis and Poloff
Hankey to discuss commercial interests important to
Jefferson's constituents. One of the top issues was
concessions in Nigeria's marginal oil fields, 24 of which
have already been offered. Kupolokun said some signing
bonuses have already been paid for these fields.


3. (U) Kupolokun gave tentative encouragement to Jefferson's
suggestion for U.S. companies to establish common
well-to-terminal oil transfer systems for the disparate
fields. "I don't find any problem with it" in general, the
NNPC boss said, adding that he would look at proposals as
they cross his desk. He cautioned that a common oil delivery
system may be difficult in the Niger Delta. However, he
specifically pointed out a concentrated area near Calabar
that may generate up to 40,000 barrels per day, enough oil to
make a common system profitable in that one area.

From Gas Fields to Grain Fields
--------------


4. (SBU) Kupolokun expressed the same tentative encouragement
for Jefferson's proposal that Nigeria establish an LNG-based
fertilizer plant in the Niger Delta. Jefferson said Nigeria
could become a major world exporter of low-cost fertilizer by
inviting a U.S. company to produce 200,000 tons of fertilizer
annually, using just five percent of Nigeria's natural gas
production. According to Jefferson's numbers, a constituent
of his might be willing to build such a factory - at a cost
of at least $500 million - if the plant were given
reduced-cost access to natural gas until it recoups the cost
of building the factory. "OK," said Kupolokun, slouched in
his chair and his head resting in his hand. "When they're
here, I'll talk to them."


5. (SBU) Kupolokun was more animated about his own plans to
attract international investment in Nigeria's LNG sector. He
said Ward-McKenzie is helping NNPC develop a plan to offer
financial incentives to investors on new natural gas-related
projects.

Shell Reserves
--------------


6. (SBU) Kupolokun confirmed the weekend's press reports that
his corporation will be attending a Nigerian Senate hearing
soon. While the focus of the hearing is to be NNPC's budget,
Kupolokun said he was also invited to discuss Shell's recent
downgrading of its proven petroleum reserves total.
"Whatever Shell is saying is of consequence to the Nigerian
position," he said, as Shell's reduced figures were now out
of line with the GON Department of Petroleum Resources'
figures for proven reserves. Stolt Oil representative
Creaghan said Shell still owes his company millions of
dollars for contracting work done for the GON-Shell joint
venture before the figures reduction, and Shell has refused
to pay Stolt since the downgrading. Kupolokun, whose
parastatal NNPC is Shell's joint venture partner, did not
offer to help Stolt on the issue.

Verbal Dedication to Reform Remains High
--------------


7. (U) The lack of help notwithstanding, Kupolokun stressed
several times his determination to improve the efficiency,
business processes and human resources "gaps" in NNPC. He
said NNPC "needs to move aggressively" to encourage more
Nigerian firms to work in the upstream oil sector. He also
acknowledged that downstream petroleum deregulation, which
has prompted a strike last year and strike threats for the
past four months, is "a tall order," but one which the GON
would see through to its logical conclusion. Finally, he
said that before year's end the Port Harcourt refinery would
be functioning on a consortium basis.
ROBERTS