The Nigerian National Petroleum Corporation (NNPC) is in the
last stages of signing deals with ten companies to exchange around 300,000
barrels per day (b/d) of crude for imported petrol and diesel.
The deal which is under a new import scheme called Direct
Sale and Direct Purchase (DSDP) was introduced in 2016 and was carried out
through direct sales of crude oil to refiners or consultants, who in turn
supply NNPC with equivalent worth of petroleum products.
This year’s DSDP contract which was expected to have kicked
off April 1 and last for one year, will overall consume around 300,000 b/d of
crude oil worth $6 billion should oil price remain within $44/45 per barrel.
No fewer than 128 local and international oil and gas
companies had in February submitted bids to participate in the programme, but
industry sources told Daily Trust that only ten have been chosen.
Each contract, trading sources said, is going to be signed
with a foreign company and a local partner. A source listed the successful
companies’ pairings as: Vitol-Varo Energy, Cepsa-Oando, Petrocam
Trading-Rainoil Ltd., Trafigura-A.A. Rano Nigeria and Totsa-Total Nigeria.
Socar Trading was said to have signed its contract with Hyde
Energy as local partner; Mocoh-Heyden Petroleum, Mercuria-Matrix Energy and MRS
Oil/Gas-Litasco while Ivory Coast’s SIR refinery was paired with Sahara Energy
Resource Ltd.
It was also learnt that four of the 10 groups have signed
contracts with the NNPC, while the rest are expected to sign today.
“Apparently arguments over sulphur levels have held up some
signings. NNPC is asking for maximum of 50 parts per million (ppm) sulphur for
gasoline, when the term sheet said 150 and the old contracts allowed up to
1000. Apparently the 50ppm opening offer led some of the companies to demand
exorbitant price premiums, which they then did not want to back down from,” a
source familiar with the deal told Daily Trust.
“NNPC might compromise and allow higher sulphur levels for
gasoline, but I don’t know what that means (150 versus 50, something higher
than 150),” the source added.
Old oil swap under new name?
NNPC is normally allocated 445,000 barrels per day crude for
the local refineries but the refineries utilise less than that. The rest of the
crude is then traded off in swap deals and exports.
The corporation had in 2016 replaced the offshore processing
arrangement (OPA) and crude oil swap - deals which NNPC uses to trade crude oil
for refined products - with the DSDP arrangement.
It cancelled them after years heavy criticism trailed the
contracts whose terms short-changed Nigeria.
The Nigeria Extractive Industries Transparency Initiative
(NEITI) in 2015 estimated that Nigeria lost $966 million to crude oil swap deal
between 2009 and 2012 and billions of naira in subsequent years until the NNPC
headed to its call for the discontinuation of the OPA in April 2016.
Group managing director (GMD) of the NNPC Maikanti Baru had
while declaring bids open for the DSDP in February said the new scheme had in
the last one year saved the country over half a billion dollars and that the
DSDP now guarantees that products are received by it in full and with extra
margins, unlike it was with the OPA.
Some industry experts who have been trying to draw
comparison between the DSDP and old swap or OPA system, concluded that even
though there was no difference between them, terms of the contracts not only
differed but that the DSDP has better level of transparency.
“It looks like the same thing under a new name because the
underlinings of the transactions remain the same,” Head of Investor Relations
at United Bank for Africa (UBA) Abiola Razaq said adding that “It may look in
the surface to be the same thing; the terms of the contract are different.”
“I think we should also give some level of credit to the
NNPC and government for their ability to be able to sustain product supply in
the market for the last five months despite the volatility in the FX market and
other challenges we have had in the market,” Razaq said.
Director of the Centre for Petroleum, Energy Economics and
Law, University of Ibadan Prof Adeola Adenikinju also agreed that the new
arrangement with previous swap were the same in principle except that the terms
of deferred.
“I think there should be more disclosure around the deals.
For example is it 445,000 b/d or less? More importantly is for us to get our
domestic refineries to produce and refine our crude,” Professor Adenikinju
added.
By Daniel Adugbo
