The China National Petroleum Corporation was allocated four of 17 oil blocks that were on auction by the Nigerian government in Lagos Friday May 19th. The licenses were given to the Chinese to explore two blocks located in the lake Chad basin area and two in the restive Niger Delta area.

This deal was to concretize agreements reached between Nigeria and China during the visit of president Hu Jintao of China to Nigeria last month. In the agreement, Nigeria was to offer to China National Petroleum Company ‘first right of refusal for four oil exploration bocks during the licensing round of 19^th May 2006’. In exchange, China was going to invest some $4bn in oil and infrastructure projects in Nigeria. These projects included the building of a railway system and power stations. China was also to buy the controlling stake in the 110,00 barrel-a-day Kaduna oil refinery and make it more efficient.

 China is expected to pay  $5.01m and $10.01m respectively for the exploration rights of the Niger Delta basin area while a very small amount will be paid for the risky Chad basin rights. “The success at the bidding has given us the opportunity to be part of Nigeria’s massive oil sector”. Said Huang Yu, vice-president of the China National Petroleum Corporation.

 Eleven companies qualified for the bid including two local companies from the troubled Niger Delta region.

Nigeria is the first largest oil producer in Africa and the 7^th in the world with an estimated daily production of 2.6 million barrels of crude oil. China is the most populous country with the fastest growing economy in the world. China’s quest for new sources of energy for her expanding economy has become more and more urgent. This deal is seen as a significant first step for the Chinese to position themselves as future players in the Nigerian oil sector that has always been dominated by Western oil companies.