Russia’s energy diplomacy: Lessons for Nigeria
For nearly two decades, Nigeria has been preoccupied with the Petroleum Industry Bill (PIB) premised on the assumption that the energy world will stand still and wait for the enactment of the bill into an act. The truth is that energy diplomacy has gone farther than a never-ending bill in the National Assembly and the energy world has since moved on with or without the PIB.
Breathed life back into OPEC
Russia is one of the world’s biggest oil exporters. Even without being a member of the Organisation of Petroleum Exporting Countries (OPEC), the country wields big influence in concert with the oil cartel especially in the bid to stabilize global oil prices. Its willingness to continue cooperation on efforts to erode a global crude glut has helped to keep oil prices fairly stable.
Cooperation between Saudi Arabia and Russia has “breathed life back into OPEC” and made the kingdom more optimistic about the outlook for oil than it has been for several years, Saudi Minister of Energy and Industry Khalid Al-Falih said.
Oil futures rose 1.6 percent in New York as Saudi King Salman bin Abdulaziz made a historic trip to see Russian President Vladimir Putin. The king expressed a desire to maintain output caps agreed to with Russia and other producers 10 months ago.
West Texas Intermediate for November delivery climbed 81 cents to settle at $50.79 a barrel on the New York Mercantile Exchange. Brent for December settlement gained $1.20 to settle at $57.00 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $5.85 to December WTI.
Russia is achieving its goals in the accord with OPEC and the oil market is rebalancing step by step. The Saudi courtship of Russia reflects a convergence of interests between the nations, both of which want to spur a recovery in crude prices.
The heart of energy diplomacy
Just like Nigeria, Russia relies on energy for a large portion of its budget revenue. Russia’s budget revenue from oil and gas taxes, which earlier this year recovered to 2015 levels, fell again by July on crude-price fluctuations and a stronger ruble. While oil prices have since returned to a bull market, risks remain and crude could fall as low as $40 a barrel next year, but that has not deterred the country with its energy forward-looking plan.
Apart from helping to stabise the oil prices, investment is also at the heart of Russia’s energy diplomacy. While Iran has been actively seeking foreign partners to help boost its output as the country opened up its oil sector following the easing of international sanctions against it last year, Russia is exploring options to garner commercial benefits from its close ties with the Islamic republic.
Iran’s oil ministry and state-owned National Iranian Oil Co., or NIOC, is also in discussion with Russia’s Lukoil for a memorandum of understanding, covering exploration and studies at a number of Iranian oil fields. Gazprom Neft is working with Iran on three projects: Farzad B, Kish and Azar. The Russian company signed a memorandum of understanding with Iran’s Oil Industries’ Engineering & Construction in July to evaluate and study oil fields in Iran. This includes potential joint studies at the Azar field, which is part of Anaran block near the border with Iraq. Since last year, a number of MOUs have been signed between Russian companies and NIOC, but they are yet to turn into concrete agreements.
Also, Saudi Arabia and Russia plan to set up a $1 billion fund to invest in energy projects, according to Alexander Novak, Russian Energy Minister. The fund was part of efforts by two of the world’s biggest oil producers to expand cooperation.
“Our focus is not just on strengthening our cooperation within the framework of the OPEC and non-OPEC (agreement) but also the strengthening of cooperation in oil, gas, electricity renewable energy and other projects for oil and gas equipment,” he said.
“We are working on a number of agreements and we will announce them during the visit,” Novak said of the Saudi-Russian efforts to expand their cooperation in the energy industry.
Novak said Russian firms were discussing deals with energy giant Saudi Aramco, such as providing drilling services in Saudi Arabia and Rosneft’s interest in crude trading.
A memorandum of understanding (MoU) was expected to be signed between Novatek and Saudi Arabia on a liquefied natural gas (LNG) project, known as Arctic LNG-2, which aims to start up in the 2020s.
Russia has demonstrated how energy diplomacy works. Good enough, some members of Nigeria’s National Assembly will visit Russia this month and we hope they should learn how a resource-rich nation uses energy diplomacy to its advantage.
FRANK UZUEGBUNAM