The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has signed a memorandum of understating (M0U) with Chinese firms for investments worth up to $80 billion in the oil and gas sector.

Dr Kachikwu, also General Managing Director of the Nigerian National Petroleum Corporation (NNPC), signed the deals during the three-day road show in the Asian country, aimed at securing funds for the country’s oil an gas sector to bridge infrastructure gaps. Several Chinese firms committed $80 billion to the country’s oil and gas sector, to be disbursed over five years and the investments cover pipelines, refineries, gas and power, facility refurbishments and upstream financing. The roadshow was set up on the back of President Muhammadu Buhari’s trip to China earlier in April and after two months of preparation by officials of NNPC and the petroleum ministry targeting investment meetings with 38 Chinese firms. The former Executive Vice Chairman of Mobil signed MoU’s with companies including  China North Industries Corporation (NORINCO), CINDA, CNOOC, Chem China and Sinopec/Addax and ICC-NDRC, among others.

More investment to follow

Other than the investments reaching a total of $80 billion, the minister also received commitments from Sinopec and the China National Offshore Oil Corporation (CNOOC). These are agreements to commit to further investments in Nigeria’s upstream oil sub-sector worth around $20 billion, which will be concluded in the next few months. This will effectively take the total amount of prospective investments by Chinese firms over a five-year period to over $100 billion.

The minister also plans to embark on investment roadshows in India and the Gulf states in the coming months and substantial capital inflow into the oil and gas sector is expected. “The International Cooperation Commission (ICC) of the National Development and Reform Commission (NDRC), in charge of implementing cooperation between the Chinese government, foreign governments and organisations, had committed to developing an overarching master plan for the Nigerian oil and gas sector that will include a detailed feasibility study of the current status of existing infrastructure in the industry,” a statement provided by the NNPC read. The ICC is to begin work on developing  projects that have sufficient collateral, future cashflow, and high probability of success. This will a long way in attracting Chinese investors on the basis of massive inflow of further investment from Chinese companies into the sector.The petroleum minster believes that the investment “reflects growing international confidence in Nigeria’s oil and gas sector following major reforms over the last seven months and belief in the government and integrity of President Buhari by foreign governments and investors.”

This deal differs from that of former President Obasanjo’s administration with Chinese, Indian and Korean firms that went bust because the Nigerian government didn’t meet its end of the bargain. Dr. Kachikwu explained that the number of projects that require sovereign guarantee are limited in scope and projects will not be paid for with oil, instead the returns on investments made by the Chinese will come from the projects. These developments are a cause for optimism but the ongoing conflict in the oil producing region in the country threatens to hijack any progress made in that sector.

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