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| Ibe Kachikwu |
The Nigerian National
Petroleum Corporation, NNPC, yesterday, stated that 278 companies were vying to
secure the contract for the trading of about 950,000 barrels per day of
Nigeria’s crude oil from January 2016. Speaking at the bid opening ceremony for the sale
and purchase of crude oil grades in Abuja, Group Managing Director of NNPC, Mr.
Ibe Kachikwu, said the Federal Government was committed to ensuring
transparency in the trading of Nigeria’s crude oil.
He
said: “The essence is to ensure that nobody needs to call me personally as Ibe
Kachikwu for him to get crude allocation. So, you can imagine the burden it
takes off my shoulders. It means a good amount of my time will now go into
other relevant areas of operations, where the country needs me most.”
Vanguard report continues:
He
assured the bidders that consideration would only be given to companies that
are competent, credible and with the right capacity to deliver Nigeria’s crude.
Bidding coys
Some
of the companies that submitted bids include Forte Oil, MRS, Statoil, Eni
Trading and Shipping Limited, Sacoil Energy Equity Resources, RainOil Limited,
Repsol Trading S.A., Indian Oil Corporation Limited, Mercuria Energy Trading
SA, Gunvor and BP Oil International.
Others
are Obat Oil, Energy Network IBG, Groundwells Energy International, Universal
Import and Export International, Global Oil Incorporated, Waltersmith,
Hindustan Petroleum Limited, Societe Africaine, Nigermed Petroleum SA, Eterna
Plc, Niger Delta Petroleum Resources Limited and Strategic Fuel Fund/South
African Government, among others.
The
contract for the engagement of qualified and reputable companies for the sale
and purchase of Nigerian crude oil grades is conducted in consonance and in
pursuance of the provisions of the Public Procurement Act 2007 and the Bureau
for Public Procurement, BPP, guidelines.
Prerequisites for 26
grades
As
part of the pre-qualification requirements, interested companies are expected
to demonstrate the possession of minimum annual turnover of USD 750 million and
net worth of at least USD 300 million; ability to establish an irrevocable
Letter of Credit for the payment of any allocated crude oil subject to the
contract terms as well as the ability to pay an initial deposit of USD 2.5
million representing the first lifting deposit upon signing of the contract
agreement, among other requirements.
The
26 grade of crude on offer include Bonny Light, Forcados Blend, EA Blend,
Bonga, Qua Iboe Light, Yoho Blend, Erha and Escravos Light.
Others
are Pennington Light, Agbami, Brass Blend, Abo, Oyo, Okono Blend, Amenam Blend,
Akpo Condensate and Usan. The rest are Atam Blend, Okwori, Okoro, Ima,
Ukpokiti, Obe, Okwuibome, Ebok and Asaratoru.
… to reduce buyers
Group
General Manager, Crude Oil Marketing Division, NNPC, Mr. Mele Kyari, also said
the corporation plans to reduce the number of buyers by one-third, cutting down
the number of companies from 43 to 15 or 16.
He
said: “We have realized that in the past, we have large volume of buyers— 43 to
be specific. What that means is that we were unable to guarantee supply to any
of the customers and it opened room for optimum discretion.
“Discretion
created problems, as we are unable to satisfy any of the customers. At the end
of the day, the market becomes unstable and then you have the long term effect
of having lower government revenue.
“Our
objective is to cut down that number. This means we have to come down from 43
to something smaller. We are thinking in the region of one-third of that
number; maybe 15 or 16.”
Ends Nov 20
He
noted that the bid process is expected to be concluded by November 20, while
the contract would take off from January 2016.
Kyari
added that the objective of the process was to ensure that Nigeria’s crude oil
gets to the ultimate end users, eliminate price shocks and curb instability in
the crude oil market.
He
said: “The absence of having credible buyers has resorted in a situation where
individuals pick cargoes and they would not know what to do with it.
“At
the end of the day, it would become like an overhang and the result is that you
have oversupply: a fake oversupply that does not actually exist and then the
market reacts to it and then you have lower value.”
Bids’ spread
Kyari
explained that the winning bids would be spread across refiners, international
oil traders and indigenous companies to reduce risk.
He
said: “Once we are able to deal with the issue of reducing the number of
buyers, we will, as a market strategy, sell to people in groups. The crude oil
market has category of buyers. It has refiners, who are the ultimate
off-takers; we have trading companies and then we have Nigerian downstream
companies.
“Among
those baskets, you need to spread it so that you do not sell to any one group.
The risk of selling to one group is that they can hold you hostage, whether
they are indigenous companies, international trading companies or refiners.
Anyone of them that realize that you are stuck, you are in trouble.
“Therefore, we are going to
spread our risk across this group so that at the end of the day, we have buyers
across these categories and what that does is that it creates a landing for us;
it optimizes value for us and all those issues of pricing would not happen.”
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