US embassy cable - 04ABUJA275

UNCLAS SECTION 01 OF 02 ABUJA 000275 
 
SIPDIS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: PGOV, EPET, NI 
SUBJECT: REP. JEFFERSON'S MEETING WITH NNPC MANAGING 
DIRECTOR KUPOLOKUN 
 
 
SENSITIVE BUT UNCLASSIFIED, NOT FOR PUBLICATION ON THE 
INTERNET OR INTRANET. 
 
1. (SBU) Summary.  Nigeria National Petroleum Corporation 
(NNPC) Managing Director Funsho Kupolokun said February 16 
that he has given cautious encouragement to two petroleum 
sector projects that could be potentially profitable for U.S. 
investors:  a joint oil delivery system for marginal oil 
fields in Southeast Nigeria, and a liquefied natural gas 
(LNG)-based fertilizer plant in the Southsouth.  He added 
that the NNPC is looking for financial incentives to bring in 
LNG sector investors, but there is little the NNPC can do for 
the U.S. contractors hurt when Shell downgraded its petroleum 
reserves.  Rededicating himself to NNPC's reforms, Kupolokun 
told visiting Rep. Jefferson that NNPC would continue its 
push for upstream Nigerian producers, downstream 
deregulation, and at least one working refinery by year's 
end.  End Summary. 
 
An Opportunity on the Margins 
----------------------------- 
 
2. (U) NNPC Managing Director Funsho Kupolokun met with 
Congressman William Jefferson, Stolt Oil representative Jim 
Creaghan, Verizon representative Levin Custis and Poloff 
Hankey to discuss commercial interests important to 
Jefferson's constituents.  One of the top issues was 
concessions in Nigeria's marginal oil fields, 24 of which 
have already been offered.  Kupolokun said some signing 
bonuses have already been paid for these fields. 
 
3. (U) Kupolokun gave tentative encouragement to Jefferson's 
suggestion for U.S. companies to establish common 
well-to-terminal oil transfer systems for the disparate 
fields.  "I don't find any problem with it" in general, the 
NNPC boss said, adding that he would look at proposals as 
they cross his desk.  He cautioned that a common oil delivery 
system may be difficult in the Niger Delta.  However, he 
specifically pointed out a concentrated area near Calabar 
that may generate up to 40,000 barrels per day, enough oil to 
make a common system profitable in that one area. 
 
From Gas Fields to Grain Fields 
------------------------------- 
 
4. (SBU) Kupolokun expressed the same tentative encouragement 
for Jefferson's proposal that Nigeria establish an LNG-based 
fertilizer plant in the Niger Delta.  Jefferson said Nigeria 
could become a major world exporter of low-cost fertilizer by 
inviting a U.S. company to produce 200,000 tons of fertilizer 
annually, using just five percent of Nigeria's natural gas 
production.  According to Jefferson's numbers, a constituent 
of his might be willing to build such a factory - at a cost 
of at least $500 million - if the plant were given 
reduced-cost access to natural gas until it recoups the cost 
of building the factory.  "OK," said Kupolokun, slouched in 
his chair and his head resting in his hand.  "When they're 
here, I'll talk to them." 
 
5. (SBU) Kupolokun was more animated about his own plans to 
attract international investment in Nigeria's LNG sector.  He 
said Ward-McKenzie is helping NNPC develop a plan to offer 
financial incentives to investors on new natural gas-related 
projects. 
 
Shell Reserves 
-------------- 
 
6. (SBU) Kupolokun confirmed the weekend's press reports that 
his corporation will be attending a Nigerian Senate hearing 
soon.  While the focus of the hearing is to be NNPC's budget, 
Kupolokun said he was also invited to discuss Shell's recent 
downgrading of its proven petroleum reserves total. 
"Whatever Shell is saying is of consequence to the Nigerian 
position," he said, as Shell's reduced figures were now out 
of line with the GON Department of Petroleum Resources' 
figures for proven reserves.  Stolt Oil representative 
Creaghan said Shell still owes his company millions of 
dollars for contracting work done for the GON-Shell joint 
venture before the figures reduction, and Shell has refused 
to pay Stolt since the downgrading.  Kupolokun, whose 
parastatal NNPC is Shell's joint venture partner, did not 
offer to help Stolt on the issue. 
 
Verbal Dedication to Reform Remains High 
---------------------------------------- 
 
7. (U) The lack of help notwithstanding, Kupolokun stressed 
several times his determination to improve the efficiency, 
business processes and human resources "gaps" in NNPC.  He 
said NNPC "needs to move aggressively" to encourage more 
Nigerian firms to work in the upstream oil sector.  He also 
acknowledged that downstream petroleum deregulation, which 
has prompted a strike last year and strike threats for the 
past four months, is "a tall order," but one which the GON 
would see through to its logical conclusion.  Finally, he 
said that before year's end the Port Harcourt refinery would 
be functioning on a consortium basis. 
ROBERTS