Don't Miss


Home   >   Business   >   Industries   >   Energy   >   New lifting terms will abolish hawking of crude oil – NNPC

New lifting terms will abolish hawking of crude oil – NNPC

By on November 4, 2015

The Nigerian National Petroleum Corporation (NNPC) has said that the new measures it put in place to select  new off-takers of Nigeria’s crude oil grades will eliminate ‘hawking’ of Nigeria’s crude oil at the international markets.

The Corporation, which received 278 bids from indigenous and foreign firms seeking to secure contract for the sale and purchase of the country’s 26 crude oil grades, which are on offer, explained that it was taking such measure to sanitise the commercial value of Nigeria’s crude oil.

It said that robust and credible candidates would be considered within the framework for selection of new off-takers, who are expected to commence lifting in January 2016.

The NNPC explained that this would be in addition to cutting down the number from 43 to about 16 to create some level of supply stability for the off-takers.

The 26 grades of Nigerian crude oil on offer include: Bonny Light, Forcados Blend, EA Blend, Bonga, Qua Iboe Light, Yoho Blend, Erha and Escravos Light. Others include:  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
As part of the pre-qualification requirements, interested companies are expected to demonstrate the possession of minimum annual turnover of $750 million and net worth of at least $300 million.

They are equally expected to show ability to establish an irrevocable Letter of Credit (LC) for the payment of any allocated crude oil subject to the contract terms as well as the ability to pay an initial deposit of $2.5 million representing the first lifting deposit upon signing of the contract agreement among other requirements.

Group General Manager, Crude Oil Marketing Division of the NNPC, Mallam Mele Kyari who spoke at the opening of bids in Abuja, informed that with the new measure put in place, such incidences of brief case companies and hawking of Nigerian crude would be cut off.

“As you are aware, we have clear objectives and that is to make sure that our crude oil ends with the ultimate end user. What that does is that it balances our pricing and we don’t have these shocks that we are having and Nigeria does not become a major contributor to the instability in the crude oil market which is happening today,” he said.

He added that: “The absence of credible buyers has resulted in situations where individuals pick cargoes and they will not know what to do with them and at the end of the month it becomes an overhang and we have fake supply glut or oversupply that doesn’t exist but which the market reacts to and we have lower values.

“Our first reaction to that is commercial and it is to make sure that we optimise the value of our crude and for you to do that, you must get credible and reliable customers who also need you in the sense that they need to lock down their deals which means, to have buyers who take off from them and they need to be guaranteed that every month they will have supplies; some level of stability that will enable them plan,” Kyari said.

“What that does to us is that it stabilises our prices and optimises our value. We have realised that in the past we have large volume of buyers, 43 to be specific and what that means is that every month we are unable to guarantee offtake to any of the customers and that opens room for optimal discretions which creates problems because you are unable to satisfy any of the customers and at the end of the day, the market becomes unstable and we have lower government revenue,” Kyari explained.

“Our objective is to cut down that number and that means that we come down from 42 to something smaller. We are thinking in the region of one third of that number, probably 15 or 16 and that will be an optimum number. Once we are able to do that, then we will need to as a market strategy sell to people in groups because this market has categories of buyers. The idea is to select companies that are credible, capable with track record and would not go to hawk our crude. We are going to get as close as possible to the end users of our crude. What this means is that we are going to eliminate all those transactions that are not necessary,” Kyari added.

 

[ThisDay]