Dubai Will Invest the Most in Deal to Boost Nigeria

Posted by The Wall Street Journal on 2009/01/21 | Views: |

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Dubai Will Invest the Most in Deal to Boost Nigeria

Dubai will invest most of the $16 billion planned in an infrastructure deal with Nigeria to develop oil and natural-gas drilling projects and the dilapidated power sector in the West African country, an official with Nigeria's state petroleum company said Monday.

LONDON -- Dubai will invest most of the $16 billion planned in an infrastructure deal with Nigeria to develop oil and natural-gas drilling projects and the dilapidated power sector in the West African country, an official with Nigeria's state petroleum company said Monday.

The deal, signed last week, many details of which have still to be hammered out, could be a boon to the impoverished West African nation where past and present governments have long been unable to meet the population's basic development needs, such as reliable electricity supplies.

The planned decadelong investment comes at a time when tumbling crude prices are putting stress on Nigeria's oil-dependent economy and signals willingness by the Dubai government to seek investment deals further afield as Gulf opportunities dry up amid the global financial meltdown.

An official with the Nigerian National Petroleum Co. said the deal involved Dubai Natural Resources World teaming up with the state-run NNPC to bankroll new oil- and gas-drilling projects and build at least 1,000 megawatts of gas-fired power generation.

"This would be across-the-board energy-infrastructure projects. Dubai wants to help us do things that others [international oil companies] haven't been willing to do," the official said.

While Dubia would invest most of the money, Nigeria too could pony up some funds to contribute, he said.

Dubai Natural Resources World, a unit of state-owned investment company Dubai World, confirmed the agreement in a statement over the weekend.

The deal also envisages building new pipelines to distribute gas to areas cited for planned industrial activity and possible investment in liquefied natural-gas facilities, the official said.

But there are a host of uncertainties in the deal, including how Dubai will finance its planned investments. Militant violence also continues unabated in Nigeria's main oil- and gas-producing region, which has hobbled energy projects over the past three years.

Dubai, one of seven emirates that make up the United Arab Emirates, has been rocked by the financial crisis and credit-rating agencies have slashed their outlooks on a number of Dubai-controlled entities, including property developers.

Nigeria is one of Africa's biggest oil producers, and has the world's seventh-biggest proven natural-gas reserves, but it has a poor track record of developing those supplies.

For decades, foreign companies working with the NNPC have flared off most of Nigeria's oil-associated gas because the domestic market was small with few industrial and retail consumers. This has begun to change in the past decade with the building of terminals that liquefy natural gas for export on tankers bound for Europe and the U.S.

Foreign oil companies have resisted investing more in Nigeria's domestic gas and power infrastructure, in part because of low gas prices set by the government. It is unclear if Dubai will get any financial breaks on its gas and power investments because of the country's low retail energy prices.

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