“The basis for such work for years to come has been put in place today,” Medvedev announced to the reporters after talks with President Umaru Yar’adua.

“The prospects are very good,” he stated, adding that potential Russian investment in Nigerian energy sector could be worth “billions of dollars”.

Yar’adua stated that the ratifying the agreement “enables a great opportunity” for numerous energy projects, including the ambitious Trans-Saharan Gas Pipeline targeted at sending Nigerian gas to Europe.

Gazprom wants a stake in Nigeria’s vast gas deposits and is prepared to invest in energy infrastructure to get that access, officials said.

Gazprom has complained it is lacking behind its foreign competitors, saying it is prepared to mount a challenge to companies like Royal Dutch Shell, Chevron and ExxonMobil in Nigeria.

The Nigerian economy is heavily dependent on the oil sector which, according to the World Bank, accounts for over 95 percent of export earnings and about 85 percent of government revenues. The oil industry is primarily located in the Niger Delta where it has been a source of conflict. The industry has been blamed for pollution that has damaged air, soil and water leading to losses in arable land and decreasing fish stocks. Local groups seeking a share of the oil wealth often attack the oil infrastructure and staff, forcing companies to declare force majeure on oil shipments. At the same time, oil theft, commonly referred to as “bunkering” leads to pipeline damage that is often severe, causing loss of production, pollution, and forcing companies to shut-in production.

In addition to oil, Nigeria holds the largest natural gas reserves in Africa but has limited infrastructure in place to develop the sector. Natural gas that is associated with oil production is mostly flared but the development of regional pipelines, the expansion of liquefied natural gas (LNG) infrastructure and policies to ban gas flaring are expected to accelerate growth in the sector, both for export and domestic use in electricity generation.

The country’s energy consumption mix is dominated by oil (53 percent), followed by natural gas (39 percent) and hydroelectricity (7 percent). Coal, nuclear and other renewables are currently not part of Nigeria’s energy consumption mix, with the exception of biomass often used to meet rural heating and cooking needs.