U.S. Mission Partners with American Business on Energy

UNCLAS SECTION 01 OF 02 ABUJA 002243 SENSITIVE SIPDIS DEPT PASS TO USTR-AGAMA, USTDA-FITTS/MARIN, EXIM-RICHTER PASS USAID AFR/SD FOR MICHAEL CURTIS DEPT OF ENERGY FOR CAROLYN HAYLOCK AND GEORGE PERSON E.O. 12598: N/A TAGS: EPET ECON ENRG PGOV EAID ETRD EFIN EINV NI SUBJECT: U.S. Mission Partners with American Business on Energy Issues SENSITIVE BUT UNCLASSIFIED - NOT FOR DISTRIBUTION OUTSIDE USG ¶1. (SBU) SUMMARY U.S. Mission in Nigeria is working with the American Business Council (ABC) to operationalize a public-private partnership on energy issues and other economic and business issues. The Ambassador opened a recent meeting with ABC with a review of progress to date, which includes a big step in influencing reforms in the trade regime and the elimination of almost half of all import bans. She said that she looked forward to working even more closely with ABC to ensure continued economic growth in Africa's most populous country, while opening further opportunities for U.S. businesses. Discussions in the working segment of the meeting included ABC's thoughts on pending local content legislation. ABC members said the current global financial crisis will shelve development projects that the international oil companies (IOC) were planning in the near-term as well as exploration due to the credit crunch, security, budget cuts, and failure of Government of Nigeria to pay monies owed to joint ventures. The proposed local content bill has had its second reading in the House and is now before the Upstream Petroleum Committee. ABC wants to ally with U.S. Mission in working with regulatory authorities and the Power and Gas Ministries to support progress on electric power generation. The Nigerian Extractive Industries Transparency Initiative is moving forward to assess state of measurement of petroleum resources. END SUMMARY. ¶2. (SBU) Ambassador Sanders opened U.S. Mission meeting with the ABC at the Embassy on October 21. In her welcome remarks the Ambassador emphasized the need to operationalize the ongoing cooperation between USG Team Nigeria and the ABC. The two teams, she continued, worked closely together in the runup to last December's TIFA Council. The partnership has already netted results, including reforms in the tariff regime and the elimination of almost half of all import bans. The Ambassador noted the meeting's agenda focused on energy issues critical to Nigeria's economic success and hopes for broad-based development. She said that she looked forward to working even more closely with ABC to ensure continued economic growth in Africa's most populous country, while opening further opportunities for U.S. business. ¶3. (SBU) Econ Counselor opened the working session of the meeting, focused on energy issues--local content and electricity challenges in particular. In addition he said that the USG Team would like to get ABC's input towards a measurements study about to be tendered by the Nigerian Extractive Industries Transparency Initiative (NEITI) as part of its mandate to ensure accountability for resource revenues. One ABC representative, a founding board member of NEITI, said he finds forward progress of the organization stalled and in need of an infusion of recognized leadership that could keep up momentum. ¶4. (SBU) The discussion on the local content issue was informative, with participation by all in attendance. It was noted that American companies around the world typically favor the development of local content including as a contributor to cost reduction and profitability. At the moment, the Nigerian House of Representatives is reviewing a Senate Bill which would mandate high percentages of local content in many services categories, to a degree which could impede oil and gas production. A senior official with a support services company mentioned that the Nigerian National Petroleum Company (NNPC) has already begun listing bid packages with the notation that only indigenous companies can bid, so ownership is now an issue as well as content. The group felt that there is personal rent seeking going on--a motivation for some who may try to move the consensus back towards state domination of the economy. Additionally, projects that the international oil companies (IOC) were planning in the near-term may be put back on the shelf due to the credit crunch, security, budget cuts, and failure of NNPC to pay money owed to joint ventures. ¶5. (SBU) ABC plans to work on a position paper on the electricity challenge to the business community and the economy. Econ Counselor said that the U.S. Mission looked forward to working with ABC to advise regulatory, power and gas officials on terms and conditions needed to boost the investment in power generation. Also, the Mission looked forward to ABC's comments on the terms of reference for the NEITI measurements study, and how we can support our companies' interests while assisting NEITI in fulfilling its important mandate. CURRENT DEVELOPMENTS -------------- ¶13. (SBU) A senior official of the Office of the Clerk of the House told Econ Counselor at November 4 election watch event that the ABUJA 00002243 002 OF 002 pending local content bill has had its second reading before the House and has been sent to the Upstream Petroleum Committee for consideration. Hearings have not yet been scheduled. At November 5 post-election reception at the CMR, NEITI Executive Secretary told Econ Counselor that NEITI has put out advertisements for expressions of interest to conduct the measurements study. In discussions with Econ Counselor November 11-13, service company and IOC reps said they believed that NNPC and the Executive Branch favored an approach on local content that allowed for administrative discretion rather than legislated line-item quotas. At the same time, they recognized the need to engage with the House on the current bill. The newly-formed Lagos based service companies group is putting together a new set of comments for the House that incorporate points from construction companies supporting oil and gas exploration and development projects. ¶9. (U) This cable was coordinated with Consulate Lagos. SANDERS