The Nigerian National Petroleum Corporation (NNPC) is seeking to raise $3 -$5 billion cash for crude swap deal with some of the world’s top commodity traders to fund new projects and cash call obligations, sources tell Reuters.
Citing confidential sources, reports indicate that Standard Chartered Bank was hired to advise on the oil prepayment and a request-for-proposal was issued a few weeks ago for a $3.5-$5 billion loan to be repaid with crude over five to seven years.
Sources further said a decision was expected before the end of this year. Around seven trading firms were still in the running, one added, with top trading houses Glencore, Vitol and Trafigura as being among the active contenders.
All the parties declined to comment. However, this would mark a departure from NNPC’s practice of awarding yearly crude term contracts to bidders after advertising for bids in the media in line with Nigeria’s procurement regulations.
In January this year, the NNPC granted 39 companies its crude term lifting contract which amounted to 1.2m barrels per day supply. It gave its subsidiary, Duke Oil license to lift 90,000 barrels per day.
Mele Kyari Group General Manager, Crude Oil Marketing Division (COMD) of the Corporation who announced the results in January said the contract will run for one year effective 1st January 2017 for consecutive twelve circles of crude oil allocation.
NNPC is seeking three offtakers, sources say, against 70,000 barrels per day of crude and the major traders stand a good chance of snapping up the deals. Vitol already has a major presence in Nigeria after buying petrol stations via a joint venture with local producer Oando and private equity fund Helios.
Vitol is also among a list of majors traders, including Trafigura, that participate in a swap scheme to deliver refined products in exchange for crude. NNPC currently exchanges 300,000 barrels per day of crude to cover current fuel imports.
Trafigura Beheer BV (TBBV), lifted crude oil valued at $133.09million from Nigeria in 2016.
Profit margins for trading firms have been slowly eroding over the last few years as transparency in oil markets has increased, reducing arbitrage opportunities, once based on privileged information.
Increasing traded volumes is one way to raise profits and competition is fierce for prepayment deals with state oil firms.
Cash-strapped NNPC is weighed down by billions of dollars in old debts, to joint venture partners with whom it reached a debt restructuring deal that saw $1.6 billion shaved off a debt of $6.7billion.
NNPC is foraging for every dollar it can get – at least to justify its own 2018 budget projections. The corporation said the Federal Government’s 2.3 million bpd crude oil projection for the 2018 budget is achievable and realistic.
Bala Wunti, group general manager, Corporate Planning and Strategy, during a presentation to the House of Representatives Joint Committee on 2018-2020 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) at the National Assembly Complex in Abuja on Monday, said only militancy could pose a threat.
“The 2018 crude oil national production projection for Joint Ventures, Modified Carry Arrangement or External Financing, Production Sharing Contracts, Independents, Marginal Fields and Service Contracts is about 2,298,000 barrels per day,” Wunti said.
He added that the 2018 price projection on the long term price assumption was based on price scenarios of $35 (low), $45 (medium) and $55 (high), stressing that most price forecasting agencies thought that the medium price scenario had the highest probability of occurrence which the 2018 budget was hinged upon.
Africa’s biggest oil producer and OPEC member was hit hard by the sharp drop in global oil prices in 2014 that pushed it into its first recession in 25 years. The country returned to growth-mode in the second quarter.
ISAAC ANYAOGU with agency reports
