By Tom Burgis, FT West Africa correspondent, in Lagos
The talks between a Chinese oil company and Nigeria about wresting some prime oil blocks sitting on 6bn barrels of crude from western energy groups raise some intriguing questions – even if officials warn that the deal is by no means sealed.
Firstly, the price. Oil men in Lagos talk of the Chinese putting $50bn on the table.
Secondly, how would the deal be structured? China has struck some huge bargains – in places such as Angola and the Democratic Republic of Congo – to provide sorely needed infrastructure in return for the commodities on which its fast-industrialising economy runs.
But previous efforts to reach such agreements in Nigeria have ended in acrimony and Chinese oil groups appeared to have switched tack to buying stakes in listed producers such as Addax.
A third conundrum is how the Nigerian government could sell stakes in the two of the 23 blocks under discussion whose leases run until 2019. Similarly, the production-sharing contracts that cover the five offshore blocks end only in 2020. These, though, are meant to be restructured, in any case, under a bill designed to overhaul the Nigerian energy sector that is before the national assembly.
Rising tensions between Iran and the West were shrugged off by petroleum investors on Monday, as concerns over sluggish demand continued to weigh.
Crude prices remained under pressure in spite of weekend missile tests by Iran. The country had already come under scrutiny before the weekend after it was announced by UK, US and French officials that a nuclear facility was being built near Qum.
“Whether this latest geopolitical bombshell will have what it takes to stem the severe price declines we have been seeing in energy in recent days remains to be seen,” said Edward Meir at MF Global.
“Energy’s underlying negative fundamentals continue to assert themselves in the interim. Furthermore, there is also quite a bit of spare capacity in the system, so there is no screaming need for Iran’s oil.”
Last week, unexpectedly large rises in inventories of crude and refined products drove US benchmark Nymex West Texas Intermediate 6 per cent lower over the five sessions. Meanwhile, much of the US data last week were unimpressive and lent no support to the demand outlook for energy markets.
By late morning in London on Monday, Nymex WTI was down 0.5 per cent to $65.72 a barrel, while Brent crude was off 0.5 per cent to $64.81.
(By Neil Dennis)
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