Analysis: India, China to aid Nigeria oil

India and China have decided to help Nigeria build new refineries rather that continue to buy crude oil for export from the petroleum-rich West African nation.

According to Nigeria's Department of Petroleum Resources, three major Chinese petroleum companies agreed this week to build a refinery in the delta, while India's Oil and Natural Gas Corp. also announced it will construct a delta refinery.

The news of the pledges was welcomed by Nigerian energy officials, who admitted most foreign firms rejected high-cost investments like refineries because of constant production stoppages due to militant attacks on oil and gas installations in the delta.

"With these facts confronting us, the federal government has no choice but to go into partnership with some willing firms to start new refineries," said Abubakar Yar'Adua, group managing director of the Nigerian National Petroleum Corp.

Critics of the Nigerian government's handling of its petroleum industry point to the fact the continent's largest oil producer must import 80 percent of the fuel used for its domestic needs.

"We call on the government to work out a more enduring strategy that will not only enhance steady supply of petrol, but also and more importantly, encourage local refining of petroleum products, not only by making our refineries produce at maximum capacity, but also encouraging privately licensed refineries to commence production," read an editorial earlier this week in the leading Nigerian newspaper, This Day.

However, Chinese and Indian energy firms are just the latest foreign companies to promise multimillion-dollar investments.

In January Russia's Gazprom proposed a multibillion-dollar investment package in Nigeria, setting the stage for the world's No. 1 gas firm to challenge longstanding players in Nigerian gas like ExxonMobil, Royal Dutch Shell and Chevron.

"Africa is definitely on Gazprom's international expansion path," Gazprom official Christophe Gerard said during last year's Africa Upstream oil conference. "We are ready to acquire assets. We have the money to do it."

Gazprom will most likely have to explore for untapped sources of gas in the West African country, as other major players already in Nigeria have well-established claims to areas of extraction.

So far, Gazprom, as well as the Chinese and Indian firms seeking to build refineries in the delta, appear undaunted by the prospect of having to seek out new gas reserves in the often-volatile Niger Delta, where militant groups have stepped up attacks over their anger with the government and its handling of the country's oil and gas profits.

Since the 1970s, Nigeria, Africa's No. 1 oil producer, has pumped more than $300 billion worth of crude from the southern delta states, according to estimates. But high unemployment in the delta, environmental degradation due to oil and gas extraction, and a lack of basic resources such as fresh water and electricity have angered some of the region's youth and incited them to take up arms.

A culture of discontentment with the Nigerian government and the foreign oil companies doing business there pervades the delta, as the region's oil and gas wealth rarely trickles down to the region's inhabitants, said Frank Verrastro, senior fellow and director of the Center for Strategic & International Studies' Energy and National Security Program.

"Delta residents see this wealth being exported and it infuriates them," Verrastro told United Press International.