VZCZCXRO2325
PP RUEHMA RUEHPA
DE RUEHUJA #1209/01 1811132
ZNR UUUUU ZZH
P 301132Z JUN 09
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 6452
INFO RUEHOS/AMCONSUL LAGOS 1593
RUEHJO/AMCONSUL JOHANNESBURG 0065
RUEHZK/ECOWAS COLLECTIVE
RHEBAAA/DEPT OF ENERGY WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHRC/DEPT OF AGRICULTURE WASHDC

UNCLAS SECTION 01 OF 03 ABUJA 001209 
 
SENSITIVE 
SIPDIS 
 
DEPT PASS AID AFR/SD FOR CURTIS, ATWOOD AND SCHLAGENHAUF 
DEPT PASS TO USTDA-PAUL MARIN, EXIM-JRICHTER 
DEPT PASS TO USTR-AGAMA 
JOHANNESBURG FOR NAGY 
USDOE FOR GEORGE PERSON 
TREASURY FOR PETERS AND IERONIMO 
DOC FOR 3317/ITA/OA/BURRESS AND 3130/USFC/OIO/ANESA/REED 
 
E.O. 12958:  N/A 
TAGS: ETRD EPET EINV ENRG EAGR EAID ELTN NI
SUBJECT: NIGERIA: USTDA VISIT ELICITS GON ASSISTANCE REQUESTS FOR 
PETROLEUM SECTOR 
 
REF: A. ABUJA 1050 
 ¶B. ABUJA  549 
 ¶C. ABUJA  262 
 
ABUJA 00001209  001.2 OF 003 
 
 
¶1. (SBU) Summary: The Ambassador met with Minister of Petroleum 
Resources, Dr. Rilwanu Lukman; Minister of State for Petroleum Odien 
Ajumogobia and Special Adviser to the President on Petroleum, 
Professor Emmanuel Egbogah on June 8 to introduce U.S. Trade and 
Development Agency (USTDA) Africa Manager Jason Nagy to discuss 
possibilities for USTDA to assist oil and gas sector reforms and 
related efforts.  Lukman briefed on the petroleum sector reform 
program and asked for help in establishing three oil and gas 
regulatory authorities, technical assistance for refining, and other 
capacity building.  He underscored that sectoral reforms are meeting 
resistance and U.S. assistance is urgently needed and said the 
Ministry would submit a formal request in writing detailing priority 
areas for assistance. (Reftel C). End Summary. 
 
LUKMAN BRIEFS ON THE REFORM 
--------------------------- 
 
¶2. (SBU) Ambassador met with Minister of Petroleum Resources, Dr. 
Rilwanu Lukman, Minister of State for Petroleum Odien Ajumogobia, 
and Special Adviser to the President on Petroleum, Professor 
Emmanuel Egbogah on June 8 to introduce U.S. Trade and Development 
Agency (USTDA) Africa Manager Jason Nagy and discuss oil and gas 
sector reforms with the hope that USTDA will be able to assist 
Nigeria in its effort.  EconOff attended as notetaker. 
 
¶3. (SBU) Lukman thanked the Ambassador for the efforts of the United 
States Agency for International Development (USAID) on natural gas 
policy and pricing.  He emphasized that the work on gas delivery for 
power plants and flaring is especially critical and welcomed USAID 
to coordinate with USTDA and work closely with his staff.  He also 
thanked the U.S. Trade and Development Agency (USTDA) for its 
technical assistance in the energy sector and especially for the 
Liquefied Petroleum Gas (LPG) Framework Study.  He noted that the 
GON is currently planning the implementation of a new LPG policy and 
any additional information toward implementation and incentive 
programs from the USG is very welcome. The Ministry is working 
toward a rollout of LPG for cooking as well as for vehicles.  Help 
is still needed in initial implementation, likely through a pilot 
project in Lagos and Abuja.  LPG efforts are planned for carbon 
credit incentives, all proceeds to be used to entice the public to 
use this alternate fuel to wood cooking fires and gasoline powered 
vehicles. 
 
¶4. (SBU) The Minister continued by briefing on the major sectoral 
reform via the unbundling of the Nigerian National Petroleum 
Corporation (NNPC), to transform it into an integrated, 
international, commercial oil and gas corporation driven by revenue 
and profit.  The move is also expected to deter corruption.  The 
NNPC will become ten different groups.  The oil and gas sector 
reform seeks to transform NNPC into the new National Oil Company, to 
be known as the National Petroleum Company of Nigeria (NAPCON).  It 
shall be a fully integrated oil and gas company, competing both 
locally and internationally in all sectors of the industry.  It 
would be divorced from other conflicting roles in policy, 
regulation, and national assets management, and would focus on its 
commercial operations with the prime objectives of revenue 
generation for its shareholder - the Federal Government of Nigeria. 
 
 
The ten new groups are: 
 
- The National Petroleum Directorate, a policy body charged with the 
responsibility of detailed policy initiation, formulation and 
development for optimum resource utilization.  This is also expected 
to serve as the secretariat for the Ministry of Petroleum 
Resources. 
 
-Three Regulatory Agencies: 
 
--National Petroleum Inspectorate (NPI), which will be an autonomous 
stand-alone technical regulator and will replace the Department of 
Petroleum Resources (DPR); 
 
ABUJA 00001209  002.2 OF 003 
 
 
-- The National Petroleum Asset Management Agency (NPAMA) will 
manage petroleum sector assets and be responsible for the commercial 
regulation of all exploration and production activities in the 
upstream sector including government owned assets (NNPC Ltd), 
international oil companies and indigenous producers, whether 
marginal or otherwise.  Its span of control includes inland, 
continental shelf and offshore. 
--The Petroleum Products Regulatory Authority (PPRA) will regulate 
the commercial aspects of the downstream sector of the industry. 
PPRA will issue, renew, suspend or cancel permits or licenses and 
also ensure that quality service is provided by the operators to the 
consumers in conjunction with the consumer protection council. 
 
- The Nigerian National Petroleum Company Limited, a commercial 
center which will have strict commercial orientation and focus, and 
be vertically integrated and capable of competing both locally and 
internationally in all relevant segments of the oil and gas 
industry. 
 
- The National Petroleum Research Center (NPRC), a research and 
development center which will promote capacity building and 
maximizing local value addition. 
 
- The Petroleum Training Institute, to train manpower. 
 
- The Petroleum Equalization Fund and The Petroleum Technology 
Development Fund. 
 
And, 
 
-National Frontier Exploration Services, to be responsible for 
regulating and stimulating petroleum exploration activities in the 
unassigned frontier acreages of Nigeria. 
 
The reform plan also provides for the conversion of all existing 
joint ventures into incorporated joint ventures (IJVs).  Each IJV 
will be a corporate entity to be incorporated under the laws of the 
Federal Republic of Nigeria, and the incorporation process, 
including capitalization and restructuring, will be carried out 
through negotiations with the respective International Oil Companies 
(IOCs), during the reform transition period. 
 
(Note: Egbogah told EconOff in a separate conversation on May 22 
that the Minister of Petroleum Resources would not be the apex 
authority in the new institutional structure of the oil and gas 
industry.  Sitting at the top of the reformed oil and gas sector 
will be the National Energy Council, a supra-ministerial council 
chaired by the President, and charged with the responsibility for 
broad, long term policies of the nation's oil and gas industry. 
Under the NEC comes the Minister of Petroleum Resources, who 
supervises the National Petroleum Directorate.  The Minister of 
Petroleum Resources shall also be responsible for broad policy 
initiation, formulation and development in the oil and gas sector, 
though subordinate to the NEC.  The National Petroleum Directorate, 
which subsumes regulatory functions of the Ministry of Energy, would 
be responsible for detailed policy development, policy 
implementation and resource management.  It would also be in charge 
of planning and production activities in the industry. End Note). 
 
LUKMAN UNDERSCORES IMMEDIATE HELP IS NEEDED FOR SUCCESS 
--------------------------------------------- ---------- 
 
¶5. (SBU) The Ambassador asked Lukman to discuss his top priorities 
his sector.  Lukman asked if USTDA could help with technical 
assistance in setting up the three independent regulatory bodies 
(NPI, NPAMA, and PPRA) that will be separated from the commercial 
"for profit" organization.  Current pending legislation, the 
Petroleum Industry Bill (PIB), allows for this important separation. 
 The bill is expected to pass into law this year and the regulatory 
bodies will be launched.  There is no current structure, experience, 
or human capacity for this type of regulation.  Lukman expressed a 
need to establish a mentoring effort between Nigeria and the U.S. 
with like entities to address organizational structure, procedure, 
processes, and generally how to regulate.  Lukman reminded the 
Ambassador that the road to implementation is a tough one; and again 
lamented that there is a lot of opposition to the reforms.  He said 
 
ABUJA 00001209  003.2 OF 003 
 
 
he "needs the strength of the U.S." to be successful. 
 
¶6. (SBU) Another component of the reform is the deregulation of 
gasoline, which also faces opposition.  Lukman clarified that from a 
budget perspective the government literally cannot continue the 
subsidy and the implementation of the deregulation is likely to be 
sooner than later.  In February the GON announced that it would stop 
the subsidy it paid to the independent licensed companies that 
import and distribute gasoline and diesel.  Product importers say 
the landing cost of gasoline is between 85 and 90 naira (57 and 61 
U.S. cents) per liter.  Without a guarantee of a subsidy importers 
cannot sell at the government-controlled price. The subsidy keeps 
the cost of gasoline down to a government-controlled 65 naira (44 
U.S. cents) per liter.  Nigeria exports the vast majority of its 
crude oil and imports over 60 percent of refined petroleum products. 
 Corruption, inefficiency and lack of maintenance have crippled the 
four state-owned refineries which struggle to produce less than half 
of the 30 million liters of gasoline the country needs each day. 
(Reftel B).  Lukman also requested USTDA technical assistance to 
enable existing refineries to provide more gasoline and other 
petroleum products at market rates.  Lukman welcomed USG input to an 
integrated approach toward refining efficiency that includes 
environmental concerns. 
 
¶7. (SBU) Egbogah added that the GON would like assistance in 
implementing the Synfuels Gas to Liquid (GTL) process developed by 
Texas A&M University.  The process is proven, but to implement the 
U.S. technology in Nigeria successfully requires technical 
assistance.  Egbogah explained that the Synfuels process focuses on 
efficient high-temperature natural gas conversion into acetylene, 
which is then converted into ethylene at moderate pressures and 
temperatures.  After the ethylene passes through a catalytic 
reactor, it is converted into products such as gasoline and jet 
fuel.  He noted that Synfuels processes are also designed to be 
located upstream, in the field where gas can be converted 
efficiently, at its source, into transportable gasoline product or 
an ethylene based product. 
 
GON ASKS FOR IMMEDIATE ASSISTANCE WITH REFINING, MAINTENANCE, AND 
CAPACITY BUILDING 
--------------------------------------------- --- 
 
¶8. (SBU) Lukman thanked the Ambassador for the efforts of the USG in 
support of Nigeria's energy sectors.  The Ambassador complimented 
Lukman on the work he has done in planning the reform efforts and 
now managing the reform and the change it brings.  She also noted 
that it might not be possible for USTDA to respond to all his 
suggestions but that we would look to get a written request from the 
Ministry that prioritizes 2-3 projects for USTDA to review.  Lukman 
also added that Nigeria will be upgrading the teaching facilities at 
the Petroleum Training Institute in Effurun - Warri, Delta State and 
that curriculums will need to be developed for LPG technology 
applications, oil and gas regulation, and efficient refining 
technologies and operation. 
 
¶9. (SBU) COMMENT: The Ministry has over the course of meetings in 
the last five months with EmbOffs consistently said that they want, 
trust, and prefer U.S. engineering, project management, training, 
goods, services, and policy guidance as the anchor for the 
implementation of rebuilding a sustainable energy infrastructure. 
Improvements in the power, oil and gas industries would have an 
enormous positive effect on the Nigerian economy.  While the USG 
cannot be responsive to all Nigeria's needs, the GON's openness to 
U.S. input provides an opportunity to steer policies in more market 
compatible and stable directions.  We await the Ministry's 
prioritization of 2-3 projects for USTDA to review and decide where 
they can best add value.  END COMMENT. 
 
¶10. (U) This cable was coordinated with ConGen Lagos and cleared by 
USTDA and the USAID Mission in Abuja. 
 
SANDERS