May 18, 2017 / 11:11 AM / 3 years ago

Nigeria's NNPC finalising $6 bln worth of oil-for-product swaps

    By Libby George and Julia Payne
    LONDON, May 18 (Reuters) - Nigeria's state oil company is in
the final stage of signing $6 billion worth of deals to exchange
more than 300,000 barrels per day (bpd) of crude oil for
imported gasoline and diesel, sources with direct knowledge of
the process told Reuters.
    The contracts, which come three months later than expected,
include three more pairs of companies than last year, reflecting
Nigeria's increased reliance on NNPC for fuel imports. 
    A lack of local refining capacity means Nigeria is reliant
on imported gasoline, kerosene and other petroleum products, and
the oil price crash and militant attacks on Nigeria's oil
industry have starved independents of dollars for fuel imports.
    At least four of the 10 groups have signed contracts, set to
begin from July 1, with the rest expected to do so by Friday,
the sources said. 
    The NNPC, which is due to approve them by the end of the
week, did not immediately respond to a request for comment. 
    The fuel quality in the final agreements was not immediately
clear, but July 1 is the same deadline the country set for
switching over to higher quality, lower-sulphur fuels that
create less toxic fumes.
    Sulphur levels were a major sticking point in the
negotiations. The Ministry of Environment and the Standards
Organization of Nigeria, the body responsible for setting
requirements for imported goods, promised a switch to 150 ppm
gasoline and 50 ppm diesel.
    Some sources said the new standards would be applied. Others
reported that three different gasoline specifications - 1,500
ppm, 500 ppm and 150 ppm - would all be included in the
contracts, giving NNPC options on which to import. 
    This year's deal includes international trading houses, not
just oil refineries. The 2016 contracts included only companies
with refineries in an effort to cut out middlemen.
    The latest list contains several companies from 2016,
including Varo Energy, Societe Ivorienne de Raffinage (SIR),
Total and Cepsa. Italy's ENI and India's Essar, which won 2016
contracts, are absent from this year's list, while Socar and
Mercuria are new additions.
    The contracts were initially planned to begin in April but
last year's swap deals were extended at least twice in order to
give NNPC more time to negotiate. NNPC had previously said this
year's contracts would exchange up to 800,000 bpd of crude oil,
though at some 40 percent of peak exports that target was seen
by markets as unlikely.
    NNPC has been forced to ramp up its own fuel imports to
around 80 percent of Nigeria's consumption, according to figures
from the company and oil traders.  
    Nigeria has substantially increased its refining output this
year but the first quarter average was still only about 25
percent of its 445,000 bpd capacity. 
    It has struggled to run them at higher rates due to years of
neglect and consistent theft and sabotage of the pipelines
feeding the refineries.
    The following is a list of the 10 groupings:
 Trader/Refinery      Local partner(s)     Volume (minimum
 Trafigura            AA Rano              33,000 bpd 
 Petrocam             Rainoil/Falcon       33,000 bpd 
 Mocoh                Heyden               33,000 bpd 
 Cepsa                Oando                33,000 bpd 
 Sahara               SIR                  33,000 bpd 
 Mercuria             Matrix/Rahmaniya     33,000 bpd 
 Socar                Hyde                 33,000 bpd 
 Litasco              MRS                  33,000 bpd 
 Vitol                Varo                 33,000 bpd 
 Total                Total                33,000 bpd 
 10 groupings                              330,000 bpd
 (Additional reporting by Paul Carsten in Abuja; Editing by Jon
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below