Nigeria and a U.S. energy company have inked a $4.5 billion deal. According to the Nigerian government, the country has agreed to a Memorandum of Understanding with Vulcan Petroleum Resources Ltd.
“If successfully completed, the deal between U.S.-based Vulcan Petroleum Resources Ltd., the Nigerian government and a local firm, may transform the fortunes of Nigerians for generations to come,” notes Simon Ateba, senior correspondent at one of Nigeria leading newspapers, TheNews Magazine/P.M.NEWS. “This is a country that produces about 2.5 million barrels of oil everyday but unfortunately has no functional refineries to refine the raw material. The country then sends its crude oil abroad and gets it back at extremely high prices. This will be virtually history if six refineries are successfully built in Nigeria. Nigeria will gain billions in any currency every year and it will also contribute to the stability and prosperity of the government. What also makes this significant is that the money does not come from Nigeria. To summarize what a great deal this would be, it would mean a lot of money, great prospects, lots of jobs for Nigerians and American experts…profits from both sides.”
Although Nigeria is Africa’s largest oil producer (and the eighth largest in the world), the country has its crude oil processed overseas, which is costly. But under the new deal, Vulcan will build six refineries that will have a refining capacity of 180,000 barrels daily for Nigeria. And they will be up and running soon—two are set to be operational in a year. On average, Nigeria currently produces approximately 2 million barrels of crude a day.
But Nigeria’s oil industry has been, and remains extremely, volatile. “Oil is the main revenue generator for Nigeria and any deal in that area will also be closely scrutinized,” says Ateba. “The deal is volatile because of the huge amount of money to be invested and the issues of insecurity steamrolling the country at the moment.”
Taking a risk in inking such a major deal in Nigeria could pay off great for both Vulcan—and Nigeria. “The pluses are the financial gains that that the U.S. companies will make. It will also provide employment for U.S. experts and citizens and cement more tightly the cordial relationship already existing between the two countries,” explains Ateba. “The negatives have to do with insecurity in the country and those building it may be attacked, kidnapped or killed. Also another negative is that if the deal goes bad, if it’s abandoned midway, it will set a catastrophic signal in the psyche of Nigerians that will rise up against US companies in the oil and gas sector and other areas of business.”