Afrika Verein

Just spent a week in Hamburg where I attended the Afrika-Verein

The topic was on "Creating a Sustainable Energy Parntership". This was particularly true in the case of Germany working with Nigeria to form a comprehensive technology and expertise relationship in which Germany would supply their tens of years of experience in the energy sector and their undisputed superior technology to Nigeria's complex power sector challenges in exchange for access to Nigeria's Natural Gas.

Apparently, Nigeria has been flaring it's natural gas that comes as a bi-product from its oil wells. Natural gas, currently trading at $6 to $8 is a valuable commodity that will only continue to grow in value as it gains a large percentage in the electricity generation sector. Among its strong selling points are the fact that it is cleaner than coal and burns efficiently with current combined cycle turbines. The challenge in Nigeria has been to capture the natural gas. No current infrastructure exists to this end and so this will be a comprehensive nationwide program. I also believe that Germany is anxious to diversify its source of Natural gas for heating and electricity generation from Northern Europe and Russia, with the latter currently accounting for 34% of all of Germany's natural gas supply. The issues in Georgia and Ukraine in the last few months may be one more reason that Germany desparately wants to and needs to diversify its production.

What was most interesting about this partnership between the German Govt. through several energy companies and the Nigerian government is that it is touted as an equal partnership and a win win situation for both countries. Germany wants to distant itself from the "exploitation" mentality that pervades the "natural resource extraction" industry across Africa. Of particular note is that this arrangement was sealed under the growing and rather ambitious presence of the Chinese. From conversations with high ranking Nigerian energy officials, it sounds like the Chinese had opportunities to step up but consistently under delivered on quality hence the need to form the partnership with the Germans. How accurate this is, is anyone's guess.

One dark spot on this partnership as was raised in the closing discussion in Hamburg is that while private German companies are involved on the German side, on the Nigerian side, it is strictly a Government affair. This was attributed to the fact that there are no "real" Independent Power Producers in Nigeria at the moment. However, there are measures at policy level that are being undertaken to address this under the Power Holding Company of Nigeria PLC.

I am willing to bet on a much stronger Nigerian electricity sector in the not too distant future. And if this model is succesful, it could form a template for future win win partnerships between African Countries and natural resource constrained countries.