EU, Russia struggle for stake in trans-Saharan gas pipeline | Africa | DW | 07.07.2009
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Africa

EU, Russia struggle for stake in trans-Saharan gas pipeline

Brussels and Moscow want in on a deal between Nigeria, Niger and Algeria to construct a 4000-kilometer pipeline for natural gas. It could be a very lucrative venture, but it's also comes with some serious risks.

Sahara

Pumping gas through the Sahara to Europe sounds interesting to many investors

The $10 billion (7.2 billion euros) pipeline agreement, which was formally signed on Friday, could send as many as 30 billion cubic meters of natural gas from Nigeria to Europe.

The French energy company Total as well as Royal Dutch Shell are eager to get involved, and many European leaders hope that a direct connection with Nigeria, would help ease the EU's dependency on Russia for its gas needs.

But that fact hasn't at all been lost on those in power in Moscow, who also want a stake in the pipeline.

Last week, Russian gas giant Gazprom signed a 50-50 joint venture with the Nigerian National Petroleum Company that would see the Russians invest $2.5 billion in oil, gas processing and transport activities.

"Now that this agreement is in place, we will be talking with prospective partners who might be interested in going to bed with us on this project," Nigerian Energy Minister Rilwan Lukman told AFP news agency after the deal with Niger and Algeria was announced.

The question is: Which of the potential suitors will be successful?

The Algerian alternative

Gazprom Energy House in Moscow

Right now Gazprom has a head start

Gazprom's success in quickly cooperating with Nigeria has dismayed many business and political leaders in Europe, who have been trying for years to establish similar investment links.

But Andreas Hergenroether, the head of the German foreign trade office in Algiers, says that existing agreements between the EU and Algeria - the world's second largest producer of natural gas - could provide a hedge against the bloc becoming completely dependent on Russia.

He points out that plans already exist for two pipelines which would directly connect Algeria and the EU.

"Of course, the corresponding contracts with European gas providers have to be signed, but they would in fact represent alternatives that could be considered for diversifying the provision of gas," Hergenroether told DW-WORLD.DE.

Still, various types of uncertainties make all deals of this kind a risky enterprise.

Prices and security

A man carrying a machete walks by a burning oil pipeline

Pipelines have been attacked before in Nigeria

Natural gas is a lucrative business, but investors have to cope with the fact that the energy market in the current global economic situation is extremely volatile.

Heino Eifert, an expert with the Energy Information Service in Hamburg, thinks that would-be money-makers could get burned.

"I'd be careful with all Gazprom investments because no one knows what's going to happen to gas prices in the future," Elfert told DW-WORLD. "It is likely that gas prices will fall further than Gazprom is assuming."

And even if the price is right, the trans-Saharan pipeline is routed through some very dangerous parts of the world, and rebel groups oppose the project.

In Nigeria, for example, a group called the Movement for the Emancipation of the Niger Delta or MEND has vowed to torpedo the pipeline.

The same group attacked a Chevron oil platform junction, hijacked a chemical tanker and kidnapped six oil workers in Monday - those actions underscored MEND's willingness and ability to disrupt economic projects it considers to be exploiting the local populace.

Islamist attacks by al Qaeda and affiliated or similar groups are also a worry.

So while the EU and Russia compete to get a stake in the 4000 kilometer-long trans-Saharan pipeline, some are questioning whether the massive project will pay off or can be protected once it is completed.

Author: Alexander Göbel (jc/AFP)
Editor: Michael Knigge

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