Chinese firm to build $1 billion road in Nigeria oil hub

LAGOS (Reuters) - One of China's top engineering firms has signed a $1 billion deal to build a road around the volatile Nigerian city of Port Harcourt, the hub of Africa's biggest oil industry, the AFC development bank said on Sunday.

The deal makes Beijing a key development partner in the Niger Delta, home to Nigeria's 2.1 million barrels per day (bpd) oil industry, where poor infrastructure and a lack of investment have fuelled a campaign of violence by militant groups.

China Harbour Engineering Co. (CHEC) signed a memorandum of understanding with the African Finance Corporation (AFC) for the six-lane ring road during a visit to China by Nigerian local government and AFC officials last week.

"The 125-km highway will be the largest municipal highway project in Africa and is expected to be a catalyst to the city's economic development," the AFC, a private sector-led investment and development bank based in Nigeria, said in a statement.

It said a unit of the State Grid Corporation of China, the country's largest state-owned enterprise, would also help upgrade the region's shambolic electricity generation, transmission and distribution system.

The Niger Delta is plagued by attacks by militant groups on oil pipelines and the kidnapping of foreign workers, violence which has cut Nigerian oil output by a fifth in recent years and helped push world oil prices to record highs.

China depends on Africa for some 30 percent of oil imports and has invested heavily in top producers Nigeria and Angola.

The Nigerian government has made developing infrastructure in the delta one of the planks of its campaign to bring peace to the region, where impoverished local communities complain they are seeing none of the benefits of oil wealth.

"Infrastructure, creation of employment through capacity building of our people and growth of the economy are the essentials to solving the crisis," Rotimi Amaechi, governor of Rivers state where Port Harcourt is located, said in Beijing.

Jichang Zhuo -- chairman of CHEC parent company China Communications Construction Company (CCCC) (1800.HK) -- said he hoped his company could contribute to the economic development of Rivers and said the project would begin immediately.

SECURITY FEARS

The announcement comes two days after Nigeria's biggest construction firm, Julius Berger JUBR.LG, started pulling out of the delta because of the deteriorating security situation.

The decision by the Nigerian unit of German builder Bilfinger Berger (GBFG.DE) came after gunmen kidnapped two of its senior Germans employees by blowing their armored vehicle off the road with dynamite close to Port Harcourt.

More than 200 foreigners have been seized in the Niger Delta since early 2006. Almost all have been released unharmed.

Amaechi said the Nigerian authorities would do all they could to protect Chinese workers.

"It is the responsibility of the Rivers state government to provide security to protect lives and property. We are determined to provide security for every staff member of CCCC that comes to work in Rivers state," he said.

The World Bank said in a report last week that China was leading new financiers in Africa, estimating its funding for roads, railways and power projects at $7 billion in 2006, up from just $1 billion a year between 2001-2003.

The bulk of the commitments were to four countries endowed with natural resources -- Nigeria, Angola, Sudan and Ethiopia.

(Editing by Quentin Bryar)