MISSION COMMENTS ON OPIC INSURANCE FOR WAGP

C O N F I D E N T I A L SECTION 01 OF 02 LAGOS 002492

SIPDIS

STATE FOR AF/W
STATE FOR EB/ESC/IEC/ENR/BLEVINE
STATE FOR DS/IP/AF
STAT FOR INR/AA
STATE PASS DOE FOR DAS JBRODMAN AND CGAY
STATE PASS TREASURY FOR ASEVERENS AND SRENENDER
STATE PASS DOC PHUPER
STATE PASS TRANSPORTATION FOR MARAD
STATE PASS OPIC FOR CDUFFY

E.O. 12958: DECL: 12/03/2009
TAGS: EPET EINV EAID PGOV NI
SUBJECT: MISSION COMMENTS ON OPIC INSURANCE FOR WAGP

REF: LAGOS 2274

Classified By: Consul General Brian L. Browne for Reasons 1.4 (D & E)

Summary
--------------


1. (C) This cable responds to OPIC requests for Mission
comments on OPIC insurance for the West Africa Gas Pipeline
project. Mission is not aware of any GON opposition to the
WAGP project, and believes the project advances GON and USG
goals. There could be some negative publicity generated by
non-governmental organizations (NGOs) such as Friends of the
Earth/Environmental Rights Action regarding the project.
Local communities and landowners that feel threatened by the
project may also voice opposition. In a country with a
history of community and militia invasion and destruction of
energy facilities, negative publicity regarding the project,
whether well-founded or not, could be employed in a manner
that increases the project's political risk. However, most
Nigerians support or are benignly indifferent to the project.
Greater engagement and information sharing with responsible
Nigerian environmental NGOs and local communities could
perhaps help reduce potential opposition to the project.

WAGP Supportive of GON's Fiscal and Environmental Goals
-------------- --------------


2. (C) Mission is responding to OPIC requests for comments
on possible OPIC insurance to be issued to the West African
Gas Pipeline Company Limited (WAPCo) for the construction of
the West Africa Gas Pipeline project. (Note: U.S. firm
Chevron Texaco Global Technology Services Company made the
application to OPIC on behalf of WAPCo.) Mission notes that
the GON fully supports the WAGP project, and in fact has a 25
percent equity stake in the project through the parastatal
Nigerian National Petroleum Corporation. We are not aware of
any widespread public opposition to the project, although one
NGO described public sentiment towards the project as mixed.
Mission is not aware of any negative impact on U.S. policy
and interests of the country, nor concerns regarding the
integrity of WAPCo. Mission believes WAGP supports Nigeria's
stated economic and environmental goals in the gas sector.
Mission is not aware of any uneconomic use of raw material or
labor associated with WAGP, or adverse impact on the
country's balance of payments. Mission is not aware of
deleterious worker health and safety impacts to the project.

Possible Negative Publicity due to FOE/ERA Concerns
-------------- --------------


3. (C) There could be possible negative publicity
generated by comments made by international NGO Friends of
the Earth (FOE). FOE and its Nigerian affiliate,
Environmental Rights Action (ERA),have commented negatively
on WAGP's environmental impacts. The groups assert that:

--consultations on the environmental impact statement (EIA)
report were flawed;
--public presentation of the EIA was not properly carried
out, as stakeholders had no access to the report at
designated display centers;
--the World Bank (WB) Extractive Industry Review restrains
the WB from new investments in the extractive industries
until areas of contention are resolved and corrective
measures put in place;
--the project is unlikely to reduce gas flaring; and
--the project threatens the sovereignty of member countries.

WAPCo/Chevron Texaco believe that they have adequately
responded to concerns raised by the groups.

Public Perception Can Generate Political Risk
-------------- -


4. (C) Regardless of the scientific facts concerning the
environmental impact of WAGP, agitation by FOE/ERA and any
resulting public perception of WAGP as environmentally or
socially harmful could generate some political risk for the
project. A local newspaper published a lengthy article in
early November, re-iterating FOE/ERA charges against WAGP.
Even a small group, whether politically disaffected or
motivated by possible monetary gain, has the potential to
disrupt WAGP construction or operations. Local communities
that feel their existence or livelihoods may be threatened by
the pipeline are also a concern. Agitated local communities
have been known to impede production activity in the oil
sector and to occupy oil facilities periodically. Similar
actions can take place regarding a pipeline. Other possible
risks include physical attacks on WAPCo personnel and
physical infrastructure. Mission notes that companies
operating in the Delta routinely receive extortionate letters
demanding concessions to the local community, upon threat of
kidnapping or physical violence. While WAGP will be
constructed to the west of Lagos and outside of the volatile
Delta region, the project, particularly during the
construction phase of the project, has the potential to
attract disaffected groups seeking private gain. As such,
WAPCo could possibly be subject to some incidents of
intimidation or threats of violence. In all likelihood, such
action would be of a much lesser degree than in the Delta.

Court Case Moving Forward?
--------------


5. (U) Supported by ERA, two private individuals have
reportedly filed suit in Federal High Court to invalidate the
WAGP Environmental Impact Statement. Mission will report on
the court case septel.

Comments from Other Environmental Groups
--------------


6. (C) The Nigerian Conservation Foundation has not yet
commented on WAGP, maintaining they do not yet have
sufficient information on the pipeline route to reach a
conclusion on its impact. Nigerian NGO Friends of the
Environment Chairwoman attended three stakeholder meetings on
WAGP, and found community sentiment toward the project to be
mixed. Given the potential gas flaring reduction benefits to
WAGP, she believes the project should move forward, but did
recommend the establishment of an independent monitoring
group to ensure WAGP management met its obligations to local
community groups.

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


7. (C) Mission believes that greater engagement and
information sharing with Nigerian environmental NGOs would be
a prudent course of action to counteract some of the negative
publicity generated by FOE/ERA. While some environmental
groups appear to be cautiously supportive of the project,
others did not believe that they had sufficient information
to render a final judgment on the project. Engaging those
NGOs who are willing to evaluate WAGP on its technical and
environmental merits, rather than as a political test case,
could improve public perception of the project, and hence the
project's political risk profile.


8. (U) This cable has been cleared by Embassy Abuja.
BROWNE