India signs $6b Nigeria drilling and infrastructure deal

Nigeria signed an agreement with an Indian joint venture to give oil exploration rights in return for up to $6 billion in infrastructure investment, a top Nigerian official said.

Nigeria, Africa's top oil producer, is desperate for foreign investment in its decayed industrial base to pull its economy out of decades of stagnation.

India, where fierce econ-omic growth is driving oil consumption, is keen to secure stakes in oilfields amid fears of a looming global scarcity.

Nigeria will give ONGC Mittal Energy Limited exploration blocks with a potential to produce up to 650,000 barrels per day, and in return the Indian venture will invest up to $6 billion in power, railways, oil refining and agriculture, Minister of State for Petroleum Edmund Daukoru said.

"They are targeting raising their production to 650,000 barrels per day. We will give them oil blocks where they have to find that," Daukoru told Reuters shortly after signing the agreement.

ONGC is India's most highly valued company, while Mittal Steel is the world's largest steel maker.

ONGC's overseas arm ONGC Videsh has only recently started producing oil in Russia and hopes to reach 600,000 bpd worldwide by 2010.

Long-term contract

The Indian venture's investments would be proportional to the scale of oil discoveries under the agreement, and could be lower than $6 billion depending on what was found, Daukoru said.

The oil exploration blocks have yet to be identified but could be chosen from those that failed to receive bids in a recently concluded licensing round, he added.

ONGC Videsh bid $485 million in signature bonuses for a 100 per cent stake in two deep water Nigerian exploration blocks in the August licensing round, and was awarded a 25 per cent share in each in partnership with Korean National Oil Corp.

Nigeria gave Taiwanese and South Korean companies preferential rights in the licensing round in return for massive promised investments in infrastructure, which angered US oil companies unwilling to enter such unconventional deals.

The Indian power project in Nigeria would be a coal-fired independent power producer while the railway is meant to travel from the southern oil city of Port Harcourt to the country's second city Kano, 1,000 km to the north.

Investments will also cover large-scale agriculture and one refinery, Daukoru said, without elaborating.

India already has a long-term contract to import 40,000 barrels per day of Nigerian crude oil, and it buys more on the spot market.

clear departure

Industry audit to be released in February

New York: An audit of the Nigerian oil industry will be completed by December and will be made public in February, the country's minister of solid minerals said.

The audit is being undertaken by British consultants Hart Group under a global campaign known as the Extractive Industries Transparency Initiative (EITI).

The Nigerian oil industry became a haven for corruption and mismanagement during 15 years of military dictatorship until 1999, and it has proved resistant to reform under President Olusegun Obasanjo.

Nigeria is the world's eighth-largest oil exporter but billions of petrodollars have been stolen by corrupt officials or squandered. Most Nigerians live on less than $1 a day and have seen few benefits from their country's oil wealth.

"The audit will enable a clear departure from the past when the members of the public didn't always know what it was that the government was earning from oil," Minister Oby Ezekwesili said during a tour to promote US investment in Nigeria.

- Reuters