Foreign Relations of the United States, 1977–1980, Volume XVII, Part 2, Sub-Saharan Africa

45. Memorandum From Gerald Funk of the National Security Council Staff to the President’s Assistant for National Security Affairs (Brzezinski)¹

Washington, June 4, 1979

SUBJECT

• Obasanjo’s Letter on LNG²

Attached is State’s analysis of the issues raised by Nigeria regarding U.S. policy on the purchase of liquified natural gas (LNG), as coordinated with CIA and DOE.³ A State draft reply for the President will be provided in the next few days.⁴ (C)

A summary of the State analysis follows: (Rud Poats will add appropriate comments.) (U)

Nigeria is irritated with our failure to respond to their urgent offer to sell us LNG. They produce 2.4 billion c/ft./day, and flare 95% of it. They now sell us over 1 billion b/d of crude oil,—50% of their production, 15% of our imports. There have been rumors of threats to cut this supply to some degree or other, in response to a positive Case-Javits determination.⁵ But in spite of the obvious importance Nigeria attached to Rhodesia, it seems likely that a market for LNG is of more importance to them, and will ultimately determine where and how they will offer to sell crude. (C)

LNG Project Background. In 1978, the Nigerian national company, plus Phillips, Shell, BP, ELF and AGIP formed the Bonny LNG Company to market 2/3 of Nigeria’s gas, mainly to the U.S., in about 4/5 years, at prices estimated from $3.25–$5.00/mm BTU. (C)

Contract Talks. Bonny talks with U.S. pipeline companies have not gone well, and most issues remain unresolved. When the companies expressed doubts about winning U.S. regulatory approval, the Nigerians took this as evidence of USG opposition to the whole project. (C)

Government Discussions. The Nigerians have been pressing for a preliminary USG approval, prior to formal application. They received a non-committal reply from Schlesinger in June 1978,⁶ and tried to see the President last March. DOE has stressed that while we may buy some Nigerian LNG, U.S.-Alaskan, Mexican and Canadian gas has priority. (C)

Regulatory Procedures and Status. In addition to state and local approval, Bonny must get by DOE, FERC, and ERA, and the process can only begin after a contract is signed. It will be a lengthy process. (C)

U.S. Policy. Nigerian LNG would not come on stream until about 1985, and the U.S. policy of import pricing competitive with alternatives will probably be unchanged. Pricing should be on the basis of real cost, not rolled-in or average cost. On this basis, Nigerian LNG may well not be very attractive for the 1985–90 period. But then, it may be. (C)

Credibility of Nigerian “Threats” on Rhodesia. Nigeria could divert a substantial portion of its crude from the U.S. within 90 days, and the cost of low sulphur crudes would go up in the U.S. Nigeria is deeply committed on the Rhodesian issue, and would have to retaliate in some measure against a positive Case-Javits determination. However, the sale of LNG is of great importance to Nigeria, and so long as the FMG feels the U.S. LNG market is possible, they will be cautious. (C)

U.S. Response. We can’t give the kind of assurances which Obasanjo wants, but we should be “forthcoming” and prompt in our response. (C)

1. Source: Carter Library, National Security Affairs, Brzezinski Material, President’s Correspondence with Foreign Leaders, Box 14, Nigeria 1–10/79. Confidential.
2. Dated May 24. (Ibid.)
3. The undated paper is attached but not printed.
4. See Document 46.
5. The Case-Javits amendment (approved July 26, 1978) required President Carter to lift sanctions against Rhodesia if he determined the Salisbury elections were free and fair and that the Government of Rhodesia demonstrated willingness to negotiate in good faith at an all-parties conference.
6. See Document 39.