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NNPC fights ExxonMobil, Shell over oil cargoes

By on April 20, 2016

The Nigerian National Petroleum Corporation is in a standoff with energy giants, ExxonMobil and Royal Dutch Shell, over ownership of physical crude cargoes as the country seeks to shore up the budget.

The dispute has delayed some of the country’s monthly oil export programmes and added to confusion over how much crude Nigeria has at its disposal to exchange for petrol, sell to fund the 2016 budget or use as debt collateral.

Discrepancies between the NNPC and companies with production sharing contracts that entitle them to oil have always existed, but the crude price crash has increased the urgency to sort them out as both state and foreign firms feel the pinch.

Reuters reports that the stakes are high for Nigeria, which is fighting its worst financial crises in years, and is also swapping more oil for petrol to end a nationwide fuel shortage.

“The NNPC needs every cent it can get for fuel,” said a source close to the negotiations, adding that “the NNPC had a different set of books” than oil majors.

But oil majors have also been forced to foot a hefty bill to cover the corporation’s portion of joint venture project costs, making them unlikely to give ground.

At issue is how much oil the NNPC gets each month and how much it has to give to majors to cover costs under the PSCs that help Nigeria to export some two million barrels per day.

The lower the oil price, the more cargos needed to pay companies under contracts. But sources told Reuters that the NNPC was taking nearly as much crude for itself as when oil was above $100, eating into oil companies’ allotments.

Exxon had confronted the NNPC, sources said, by refusing to allocate barrels from the Erha stream, significantly delaying its loading programmes. Sources said the NNPC had got some six cargoes in total more than its share.

“As a matter of practice, we do not comment on private discussions with the government,” Exxon said in a statement, adding, “However, it is ExxonMobil’s expectation that all parties recognise the need to meet their contractual obligations.”

The spokesperson for the NNPC, Garba Deen Mohammed, told our correspondent, “The PSC lifting disputes between the NNPC and the IOCs as contractors had gone through arbitration and currently in courts for adjudication. We should therefore allow the law to take its course.

“For the joint ventures, the NNPC and JV partners lift and sell their equity cash call to operators monthly to fund the operations. It is, therefore, not true that the NNPC takes the IOCs’ crude cargoes meant for cash call payments.”

Shell is in a similar battle over Bonga crude, though it has simmered under the surface and has not caused significant loading programme delays. Still, a source close to the situation said that the NNPC had taken roughly nine more cargoes (worth about $357m at the current oil prices) than oil majors thought it should.

Shell declined to comment.

 

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