Nigeria awards crude to four refiners

The Nigeria National Petroleum Corporation (NNPC), has made plans to enter into a new ‘crude for oil products’ swap agreement with Total, Varo Energy, Cepsa and ENI, according to the company’s crude marketing unit. Despite exporting in the region of 2 million bpd of crude oil, Nigeria is almost entirely dependant on imported gasoline, kerosene and other petroleum products.

According Mele Kyari, Head of NNPC’s Crude Marketing Unit, the deals have been scheduled to begin in February and will deal directly with refineries who can use the crude to produce the oil products the country needs.

The NNPC’s Head of Corporate Planning, Bello Rabiu, said there was little need to budget money for fuel subsidies in 2016, because the country would be able to reduce the cost of imported fuel below the current retail price.

“In the next 12 months, the price of oil will definitely not be high…securing the pipeline systems, removing the corrupt issues and ensuring that we pay only for what we consume…if we can get all these stages done…that will eliminate any call for subsidy in the next few months,” Rabiu said.

In November, NNPC cancelled the initially planned bidding process for crude swap agreements, after deciding to pick 14 refiners that could process the oil independently in order to eliminate middlemen.

NNPC reached interim swap agreements in September 2015 with its trading subsidiary Duke Oil and NNPC joint venture companies Calson, which is with Vitol, and Napoil, which is with commodities trader Trafigura.These have potential to be extended as NNPC works to finalise all the details of the new swaps.

This comes at a key point in time for Nigeria, who’s four ageing oil refineries produced nothing in October 2015, despite a new goal from the company to try to produce 30% of its own gasoline in 2016. Alongside the swap arrangement, Nigeria also relies on an expensive import subsidy scheme. However, Nigeria has found it difficult to make all its subsidy payments to traders due to the sharp drop in crude oil prices that have taken a toll on its revenue, leading to regular fuel shortages for much of the past month.

Rabiu said the NNPC wanted to create a new framework for fuel imports that would reduce the delivery cost of gasoline to stations by10 - 15 naira/l, (UK£0.03 - £0.05), which in turn could bring gasoline belowthe price cap of 87 naira/l (UK£0.29) and thus eliminating the need to pay subsidies.

“We don’t know even what the country consumes…what we have seen, based on figures that were sent to the National Assembly, we consume 50 -55 million l/d. But many people don’t believe that’s correct,” Rabiu said, estimating a more accurate figure would be between 35 - 40 million l/d based on monitoring of truck flows.

Refineries are also expected to restart as soon as possible, hopefully adding some gasoline to the market, starting with Kaduna, which is expected to start ramping up and producing one to two million l/d of gasoline.

Sources: Hellenic Shipping News, All Africa, Leadership

Edited from various sources by Francesca Brindle

Read the article online at: https://www.hydrocarbonengineering.com/refining/21122015/nnpc-awards-four-crude-for-oil-products-swap-agreements-2022/