July 3, 2009 / 11:11 AM / 9 years ago

UPDATE 2-Nigeria, Algeria agree to build Sahara gas link

* Three nations agree to build giant pipeline by 2015

* Trans-Saharan pipeline may help European energy security

* Uncertainty over role of foreign oil companies

(Adds Nigeria oil minister, Algeria energy minister, details)

By Randy Fabi

ABUJA, July 3 (Reuters) - Nigeria, Algeria and Niger on Friday signed an agreement to build a multi-billion dollar gas pipeline across the Sahara that could send up to 30 billion cubic metres a year of supplies to Europe.

The idea of piping gas thousands of kilometres across the Sahara was first dreamt up more than 30 years ago, but the project remained on the drawing board pending a concrete agreement between neighbouring states and a clear funding plan.

“This, no doubt, is a major milestone ... in the commercialisation of the huge endowment of natural gas resources,” Nigerian Petroleum Minister Rilwanu Lukman said at a ceremony in the capital Abuja.

The project, with capital costs estimated at $10 billion for the pipeline and $3 billion for gathering centres, would send West African gas via a 4,128 km (2,580 mile) pipeline from Nigeria via Niger and Algeria starting from 2015.

The European Union sees the Trans-Saharan project as a potential opportunity to diversify its energy sources.

“This will provide another platform for a sustainable and reliable energy supply to Europe, thus ensuring security of supply,” Lukman said.

France’s Total (TOTF.PA), Royal Dutch Shell (RDSa.L) and Russia’s Gazprom (GAZP.MM) have all expressed interest in helping Nigeria’s state-run NNPC and Algeria’s counterpart Sonatrach in the project.

Gazprom and NNPC agreed to invest at least $2.5 billion to explore and develop Africa’s biggest oil and gas sector, including building the first part of the Trans-Sahara pipeline. [ID:nLO549518]

Some analysts see Russia’s keen interest in Nigeria as an attempt to maintain its grip on Europe’s natural gas supplies.

FOREIGN PARTNERS NEEDED ?

The three governments are expected to begin formal discussions with outside investors sometime next year.

But Algerian Energy Minister Chakib Khelil said the project may not need foreign help as the three countries already have the gas reserves, the money and the technology to build the pipeline on their own.

“We should be able to do it on our own,” Khelil said. “We have the expertise and I don’t think there is a problem with finance in this project.”

Nigeria has estimated natural gas reserves of 180 trillion cubic feet, the seventh largest in the world. Its liquefied natural gas company Nigeria LNG says it already provides 10 percent of world supply, much of it to Europe and North America.

But it has not been able to develop its gas industry to anywhere near its full potential because of a lack of funds and of a clear regulatory environment.

The European Union, which already relies on Russia for a significant proportion of its oil and gas supplies, sees the Trans-Sahara project as one way to bolster energy security.

But sceptics point out the pipeline will run through some volatile areas. Nigeria’s main militant group, responsible for attacks on the oil industry in the Niger Delta, has already threatened to sabotage the venture. [ID:nLS322135]

The pipeline would also pass through northern Niger, parts of which are controlled by nomadic Tuareg rebels, and southern Algeria, where Islamic militant groups have long had a presence. (Editing by Nick Tattersall, Editing by Peter Blackburn)

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