Russian energy giant may replace Shell in Nigeria following government’s decision to terminate Shell’s contract for the development of oil and gas fields in Ogoniland.

Shell abandoned the fields, which hold proven reserves of over 10 trillion cubic metres (353 trillion cubic feet) of gas, 15 years ago after its relations with the local Ogoni people deteriorated to an extent that prevented its operation there.

In June 2008, President Umaru Yar’Adua told the Nigerian community in South Africa that by the end of the year another oil operator will take over Shell Petroleum interests in Ogoniland.

In February this year, Gazprom confirmed negotiating a $7 billion contract for offshore gas exploration with the Nigerian government.

In early June, Gazprom CEO Alexei Miller met with Abubakar Yar’Adua, Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), and Tanimu Yakubu, Chief Economic Adviser to President Yar’Adua, to discuss cooperation.

Gazprom was said to have refused to comment on the possibility of replacing Shell in Ogoniland. Andrei Podoinitsyn, head of UFG Asset Management, said Gazprom needs to gain a foothold in the region now, while its profits are extremely high.

Vitaly Kryukov of the Kapital investment group said Gazprom was trying to diversify gas supply routes to the United States and Europe and strengthen its position on the LNG market.  Operation in Nigeria will also allow it to increase its share in gas supplies to southern Europe, which will definitely alarm the European Union, which wants to diversify gas supplies, he said.

Vitaly Gromadin of the Arbat Capital investment company said Nigerian officials had reportedly offered Gazprom to join the Trans-Sahara gas pipeline project.

The pipeline running across Algeria to Europe will become a major gas supply route from Africa. If it is built and Gazprom assumes control over gas supplies along this route, this will be the EU’s worst nightmare come true, Gromadin said.

"The Nigerian government apparently wants Gazprom to contribute to its energy sector, and it is highly likely that the Russian gas monopoly will take the place of Shell," he said.  Gazprom is the world’s leading gas company.