Crude oil valued at $7.1 billion has been offered in oil swaps by the Nigerian National Petroleum Corporation (NNPC) as it issues award letters to oil companies for contracts to exchange crude oil for imported fuel for another year.
Oil companies divided into 15 groups, with at least 34 companies in total, received award letters, according to a Reuters report.
They include BP/Aym Shafa 2; Vitol/Varo 3; Trafigura/AA Rano 4; MRS 5; Oando/Cepsa 6, and Bono/Akleen/Amazon/Eterna.
Others are Eyrie/Masters/Cassiva/Asean Group; Mercuria/Barbedos/Petrogas/Rainoil; UTM/Levene/Matrix/Petra Atlantic TOTSA; Duke Oil; Sahara; Gunvor/Maikifi; Litasco /Brittania-U, and Mocoh/Mocoh Nigeria.
The successful companies will sell Nigerian crude to refineries in Asia and Europe and NNPC will also award contracts to import refined products.
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The National Bureau of Statistics (NBS) said in its first quarter 2019 report that Nigeria imported petrol and other products valued at N3.8 trillion or $12.4 billion in 2018.
The deal, which negotiations began last year, will see the NNPC exchanging over 300,000 barrels per (bpd) of crude oil for imported petrol and other products. Over the course of one year, Nigeria will exchange over 109.5 million barrels of crude valued at $7.1 billion at the current Brent price of $65 per barrel.
NNPC has not made public specific details about the terms of the deal and the contracts are not disclosed. Also some of the companies offered these swap deals have been accused of gaming the system.
This fuels the perception that Nigeria’s crude lifting terms are prone to abuse because the coveted contracts give investors access to lucrative cargoes with little official monitoring, thus providing arbitrage opportunities.
“These export and import transactions yield high levels of fungible returns, and the lack of transparency surrounding them creates considerable opportunities for corruption,” says Alexandra Gillies, an advisor at the Natural Resource Governance Institute, a not-for-profit group, according to published study.
Last year, the United States authorities demanded that the US arm of Glencore plc, which often wins NNPC crude lifting contracts, hand over documents relating to its business in Nigeria on suspicion that it bribed Nigerian officials.
The new swap deals also belie NNPC’s claim that it would fix Nigeria’s refineries and end importation of petroleum products. Nigeria’s refineries still process about 5 percent of national output and in January 2019 reported an operating loss of N8.36 billion. NNPC’s new boss, Mele Kyari, has clearly indicated an intention to maintain the status quo.
“We will deliver on the rehabilitation of the four refineries within the life of this administration and support the private sector to build refineries. We will transform Nigeria into a net exporter of petroleum products by 2023,” Kyari said at his inauguration.
The same assertions have been made by previous heads of NNPC, including Maikanti Baru, the difference being how farther down the road they kick the date of ending petroleum imports into Nigeria.
The Dangote Refinery, set to come on stream in 2021, represents Nigeria’s hope for in-country refining and value addition to its crude.
ISAAC ANYAOGU
