[Editor’s note: while this blog is ostensibly about Russian affairs, we also have a strong interest in global energy politics, and will be making an effort to occasionally branch out to discuss the impact of state-owned energy firms on the market both comparatively and in the context of Russia. Once again we are pleased to feature our distinguished guest blogger Dee Prince (pen name), an international petroleum consultant specialized in China and Africa.] A Renaissance for Nigeria? By Dee Prince The last time I was in these parts, we were discussing the somewhat puzzling trepidation with which China seemed to be approaching investment in Africa’s leading petroleum exporting nation, Nigeria.
View of a Total Nigeria offshore oil and gas production platform in the Niger delta in 2005 (Photo: AFP)
Not much has changed since then. Not that one could realistically have expected any marked transformation in Chinese attitudes in such a short period of time. In any event, the putative host country of such Chinese investment continues to confound even the most diehard optimists by its inimitable ability to discourage serious investment interest in that industry. The result for Nigeria is official acknowledgment by government sources that the 2010 target date to reach 40 billion barrels of crude oil reserves through aggressive Exploration activity upstream, is pretty much a mirage. We hear the usual noises about continued violence and unrest in the Niger Delta, but recent proposed changes to the structure of the Nigerian regulatory industry (and the National oil company in particular) only serve to heighten the sense of modest disarray on that front. Frankly, the Nigerian government is immensely fortunate to have as Minister of Petroleum an indigene of the Niger Delta, who also happens to be a Partner of the country’s leading law firm (and also a friendly firm to Amsterdam & Peroff?). Without Ajumogobia’s steadying hand and refreshingly modern vision for the industry, one shudders to think how even more parlous the state of Nigerian oil and gas would be. Of course, there has been a lot of froth in the industry media in the past month about CNOOC (China’s third largest E & P company) committing some $2.3 billion to farm into one of Nigeria’s most exciting deep water fields. But, hang on a second, isn’t the same deal that was trumpeted as far back as 20 months ago as a done deal? It certainly is. The recent flurry of news about an old deal is perhaps part of the Nigerian government’s ill-thought-out attempt to show that big beast China is still looking to do mega-deals in Nigeria. This writer thinks it is mere clumsy mischief. Unfortunately, publicity and public relations are areas that the Minister does not control. Ajumogobia would certainly not permit such self-serving inaccuracies to issue forth from a government department that he supervises. So, if it is the case that China continues to be wary about additional Nigerian Oil and Gas investment, what has that got to do about Russia? Well, enter stage left, an interesting Russian-based financial super-boutique, Renaissance Capital, who is embarking upon some very interesting sub-Saharan investment deals. One of the most intriguing deals concluded some four months ago featured Renaissance as co-leader, with JP Morgan, in a trailblazing $300 million equity capital raising exercise through the placement of Global Deposit Receipts out of London. This was for United Bank of Africa (UBA), arguably Nigeria’s leading bank, and, by extension, a formidable African banking institution. This deal, coupled with a 25% equity stake it recently acquired in West Africa’s pre-eminent cross-border bank, Ecobank Transnational, means that Renaissance is gearing up to be a major player in Africa finance. Renaissance Founder and guiding light, Stephen Jennings makes no bones about the dual thrust of his African strategy. And both platforms are excitingly audacious. There is the objective to challenge China as the leading foreign investor in Africa, which this contributor feels is a long shot. However, the other plank, setting up shop in Dubai to facilitate the flow of Middle East oil money to Africa, now, that’s a very intriguing proposition.
Stephen Jennings, CEO of Renaissance Capital (Photo: Dmitry Plenkhin)
If you recall, folks, in my first contribution to this blog, I did say that there is some linkage between China and Russia when it comes to inward investment into Africa, particularly Nigerian oil and gas. Well, guess what, I think the whole Renaissance African expedition should be seen in the light of this possible linkage. Sure, Renaissance’s current big-item investments appear to be Banking/Finance-related. Because of the work I do with China’s state banking regulator, I have a fair idea of Chinese Banking/Finance investment plans for Africa. Put simply: zippo, nada, forget it. The Chinese have a big enough domestic market to satisfy their home-grown banks for a long, long time. In any case, China is more interested in attracting foreign banking investment capital than in investing outside. And if and when they do look outwards, believe me, Africa is going to rank last target-wise. However, when it comes to Oil, Gas and other natural resources, something tells me that the Renaissance business model is one that China may be looking closely at. I call it the “Stalking Horse” approach. China knows that the West is tracking every single significant investment it makes in Africa. The western majors continue to do all they can to prevent Chinese enter into Nigerian Oil and Gas, and to a large extent, they have been successful. However, China and Russia could prove to be strange-bedfellows/fair-weather friends when it comes to Nigeria and other major sub-Saharan markets. Will the Chinese sally forth where the Russians dare to tread? Sometime in the near future, Renaissance is very likely going to parlay its Banking and Finance investments into pioneering Oil and Gas investments in Nigeria and other parts of sub-Saharan Africa. UBA would be a perfect lever to achieve this, given the bank’s market-leading country coverage, and its stated interest in expanding its Energy sector banking products and services range. When this happens, Nigeria’s indigenous Oil and Gas sub-sector would be the beneficiary of such sorely needed capital. As this scenario evolves, my bet is that China would begin to feel more courageous about going into those markets like Nigeria that it presently watches with puzzling trepidation. So, the purely private sector Renaissance could find itself unwittingly becoming the leading edge for China state-owned investment interest in Nigeria and elsewhere in Africa. Unwittingly? Perhaps not. As I like to say, watch this space.