Russian war: EU forays Nigeria, OPEC for new oil and gas supply

Sopuruchi Onwuka

With the coordinated Western response against the war in Ukraine, diplomats are mounting pressure on key petroleum producing countries to create new channels of supplies to the European countries which traditionally form the biggest customers of Russian oil and gas.

Our findings show that leading officials of the European Union are riding on the back of major multinational oil firms that hold significant oil and gas interests abroad with proposals to oil producing countries and the multilateral Organization of Petroleum Exporting Countries (OPEC) for greater supplies to the continent.

The sudden moves are to push for sharp rise in supplies to fill gaps expected from looming oil sanctions on Russia.

European Union (EU) Ambassadors in Nigeria on Monday proposed stronger energy ties with Nigeria as the regional economic bloc seeks more impactful sanctions on Russia and President Vladimir Putin to withdraw their troops from collapsing Ukraine.

Ukraine, a European country, depends on the EU and the North Atlantic Treaty Organization (NATO) for help following invasion by Russia; and while Russian troops have ravaged Ukrainian cities, the Western economic and military alliance has been consistent with debilitating economic and trade sanctions on Russia. However, all the sanctions have proved insufficient to weaken the heavy hands of Russia on Ukraine.

And following strong allegation of war crime against Ukrainian civilians, the EU and NATO have vowed to extend sanctions to Russian oil and gas, a move that would significantly cut flow of petroleum income to Putin’s government. But cutting Russian oil and gas import could lead to energy crisis, cripple the European economy and escalate the prevailing trend of inflation in the continent.

President Vladimir Putin told Russian government officials in a meeting that Europe would rely on Russian energy sources in the immediate to short term, assuring them EU has no available option to Russian gas for now.

“There is no rational replacement (for gas) in Europe now,” President Putin said, blaming EU countries for talking up oil and gas prices.

Despite the bravado, Russia has seen a steep decline in production of oil, its key source of revenues, amid difficulties with payments for trading and vessels.

With the issue of sanctions on Russian oil and gas still burning, the EU is foraging the global oil sources to secure import security ahead of final decision. And OPEC and its members have remained the targets for new sources of supply.

European diplomatic delegates were in Abuja to seek enhanced energy supply from the Nigerian National Petroleum Company (NNPC) Limited; and the EU Ambassador in Nigeria, Samuela Isopi, demanded increase in the supplies of liquefied Natural Gas (LNG).

Other diplomats in the delegation include Ambassador of Portugal, Luis Barros; Ambassador of Spain, Juan Sell; Ambassador of Italy, Stefano De Leo and Deputy Head of Mission (France), Olivier Chatelais.

Major European energy firms including TotalEnergies, Shell, Eni and some international independent firms are Nigeria’s traditional investment partners in the petroleum industry. They also account for over 50 percent of the country’s total crude oil production.

In the natural gas subsector, the European firms form the only consortium in the incorporated joint venture with the NNPC Limited on Africa’s biggest gas liquefaction and export company, the Nigerian Liquefied Natural Gas (NLNG) Limited.  

Ambassador Isopi pointed at the role of European companies in Nigeria’s petroleum industry when he told the Group Managing Director of NNPC Limited, Mallam Mele Kyari, that “Nigeria is the fourth gas supplier to Europe. At least 40% of the Nigerian LNG is currently exported to Europe. We are not only major clients for Nigeria, we are also major partners in the oil and gas sector because some of the companies that are working with you are from Europe.  So we share the same interest and same objectives,” added.

Mallam Mele Kyari assured the European delegation that the company would continue to deepen its historical relationship with EU companies in Nigeria in order to add more value to its business, particularly towards increasing gas supply to the global market and enhancing domestic gas utilisation.

Beyond the demand on Nigeria, the EU and United States also call on OPEC to activate its spare capacity in filling supply gaps expected to arise from possible blanket trade sanction on Russian oil and gas.

As it considers potential sanctions on Russian oil, the EU has reminded OPEC of its responsibility to ensure balanced oil markets and demanded increased supplies to mitigate strong prices.

Foreign ministers of Ireland, Lithuania and the Netherlands disclosed in Luxembourg on Monday that the European Commission is working on proposals for an oil embargo on Russia.

Already, Australia, Canada and the United States, have banned Russian oil purchases. But EU countries which depend on Russian oil imports still tinker with plans for short term energy independence from Russia. And the bloc’s diplomats explore new sources within and outside OPEC to displace Russian supplies.

But OPEC has reiterated its handicap in taking any responsibility in addressing the fallouts of geopolitical upheavals in Europe.

The Oracle reports that Russia leads 10 country coalition members that are in alliance with OPEC. And the country has been the biggest producer in the OPEC+ alliance, but its trade with advanced economies of the world has been severely constrained and its petroleum commodities are about to be dumped by traditional customers in the EU.

OPEC has stridently resisted calls by the United States and the International Energy Agency to pump more oil to cool prices after America and Europe slammed Russia for invading of Ukraine.

Already, Russia is suffering serious difficulties with selling its oil in the international market as sanctions make financial transactions very difficult. And inclusion of oil and gas in the list of sanctions would come with compliance obligation on international traders and financiers.      

Market sources said that major global trading houses are planning to reduce crude and fuel purchases from Russia’s state-controlled oil companies as early as May 15 to avoid falling foul of European Union sanctions on Russia.

Secretary General of OPEC, Dr Mohammed Barkindo, had in Texas, the United States, declared that the organization could not accept responsibility in filling any supply gaps that might arise from trade sanctions on Russia.

He reiterated in a recent address in response to call s for more output that it would be nearly impossible to replace the magnitude of volumes sanctions would take from the market.

“We could potentially see the loss of more than 7 million barrels per day (bpd) of Russian oil and other liquids exports, resulting from current and future sanctions or other voluntary actions,” Dr Barkindo declared.

 According to Dr Barkindo who currently coordinates the activities of OPEC+, the total spare production capacity of OPEC and its allies would not be enough to displace over 11 million barrels per day currently supplied the market from Russia.

He also said that geopolitical issues fuelling oil price jumps are “non-fundamental factors” that are beyond the purview of OPEC to control.