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NNPC mulls longer term crude sale contracts

By BusinessNews Staff on March 24, 2015

As part of its new business strategies to overcome extant disruptions in the international crude oil market especially with regards to hydro-fracking technology and loss of patronage from the United States, Nigeria could resort to longer term sales contract for lifting of its crude oil.

According to the handlers of its stakes in the oil and gas industry, the Nigerian National Petroleum Corporation (NNPC), it will require more than a change of trading destination to capture and maintain new markets for her crude oil.

The Group Managing Director of NNPC, Dr. Joseph Dawha, said in a presentation he made at the just concluded 2015 edition of the Nigerian Oil and Gas (NOG) conference and exhibition in Abuja that its new strategies to capture markets for the countries crude oil will include direct sales to refineries and longer term crude sales contracts beyond the current one year.

“Exports of Nigerian light sweet crude to the U.S. and indeed all African light sweet crude to the US has now ceased.

This market disruption has led to diversion of Nigerian and other African producers’ crude to Europe and Asia,” Dawha said.

“A strategic repositioning of the destination of Nigeria’s crude trade requires more than a change of destination but must include direct sales of crude to refineries in new markets and longer term crude sale contracts beyond the current one year term,” he added.

Noting that other oil producers with similar challenges had initiated and engaged these strategies to capture more markets for their crude oil, Dawha explained that Nigeria’s crude oil with its competitive advantage in most of such destination markets would have to move in as well.

He said: “This is the market capture strategy that gulf countries such as Saudi Arabia and Kuwait have long adopted and this includes ownership of refineries in destination countries to ensure access to these markets.

“Lately, Angola has adopted this strategy with long term crude contracts to Indonesia and India. Nigerian crude is known to have competitive advantage in many of these destination market.”

Usually, traders lift crude oil according to the terms of contractual agreements applicable to all traders, among others on Free on Board (FOB) basis and proceeds paid directly into designated Central Bank of Nigeria (CBN) crude oil sales accounts. These lifters/traders are engaged on annual term contract basis.
Also, amongst other strategies which Dawha, represented by the corporation’s Head of Corporate Planning and Strategy, Dr. Timothy Okon, said will be adopted by NNPC to survive the disruptions include, upstream cost optimisation to ensure lower production cost per barrel and prioritisation of major projects in view of the low oil and gas prices.

Meanwhile, Dawha has also stated that the ongoing rehabilitation and Turn Around Maintenance (TAM) of the refineries in the country will be executed with every sense of responsibility in order to produce petroleum products that meet standard specifications.

He made this disclosure in a statement from the corporation’s Group General Manager, Public Affairs, Ohi Alegbe, where it was announced that several kilometres of internal access roads at Port Harcourt Refining Company (PHRC) and Pipelines and Products Marketing Company (PPMC) Depot in Onne had been rehabilitated by the NNPC.

Following several unsuccessful attempts at starting a TAM on its four refineries in Kaduna, Warri and Port Harcourt through the original refineries builders, the NNPC had instead commenced an internal rehabilitation process, making use of original materials procured for the TAM.

Dawha, however, said the rehabilitated roads in Port Harcourt and Onne would go a long way to promote safety and reduce the spilling of petroleum products on asphaltic surfaces.

He also noted that an increase in daily evacuation of petroleum products from 210 trucks to 260 trucks would be achieved with the rehabilitation.

According to him, the deplorable condition of the roads made loading operations at the depot difficult to petroleum tanker drivers and had led to several industrial actions, which obstructed the smooth evacuation of petroleum products from the depot in the past.

He noted that with the completion of the roads, tankers could now evacuate about nine million litres of petroleum products on a daily basis from the depot, adding that at peak the loading bays can service 350 tankers per day.

Dawha also disclosed that the installed operational storage capacities of the PPMC depot, Port Harcourt are 6.94 million litres of Premium Motor Spirit (PMS), 2.44 million litres of Dual Purpose Kerosene (DPK) and 3.2 million litres of Automotive Gas Oil (AGO).

[ThisDay]

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