Nigerians Win Big in Crude Oil Lifting Contracts

NNPC Headquarters

By Ejiofor Alike, with agency reports

The Federal Government, through the Nigerian National Petroleum Corporation (NNPC), has decided to award nearly half of 2012/2013 crude oil lifting contracts worth $60 billion to Nigerian companies and in the process, downsizing contracts awarded to international oil traders.

In the past, foreign traders such as Glencore, Trafigura, Vitol, Arcadia, Addax and Glencore dominated crude contracts.

But in a deliberate move to promote local content, sources confirmed yesterday that more Nigerian companies will henceforth be awarded lifting contracts.

Sources in NNPC informed THISDAY that major operators, such as Sahara Energy Ltd, Oando Plc, Aiteo, Ontario Petroleum and Taleveras have been awarded lifting contracts side by side foreign traders.

Quoting documents sent to successful companies, Reuters reported yesterday that the NNPC allocated about three-quarters of its daily production or around 1.6 million barrels per day (bpd) via term contracts to 50 companies, including 21 Nigerian firms.

According to the news agency, the number of companies on the list grew from last year's 45 to about 65, with many Nigerian companies making the list, the document showed.

It was further learnt that the number of companies allotted crude oil lifting contracts has increased two-fold in the last five years.

In documents obtained exclusively by THISDAY, the number of companies selected to lift Nigeria’s crude oil in 2008 was 28, including bilateral and government-to-government contracts.

In 2009, the number fell to 24 but rose to 38 in 2010, and almost doubled to 57 in 2011.

In each of the crude contract lists between 2008 and 2011, international traders such as Acardia, Addax, Trafigura, Glencore, Gunvor Trade International had the highest allocation of 60,000 bpd.

Sahara Energy was the only Nigerian firm with the same allocation that consistently featured on the lists between 2008 and 2011.

Some of the major local players that made it in 2011 were Eterna, SPOG Petrochemical, Oando, Masters Energy and a host of others.

Caligeria Oil, SPOG Petrochemical, Tacoma Oil Ltd, Sullum Voe and Tempo Energy got allocations of 30,000 bpd each in 2011, with the contracts expiring on July 31, 2012.

Crude oil to be lifted in 2012/2013, which is put at some 580 million barrels sold over the next 12 months, is valued at nearly $60 billion based on current premiums of the country's light, sweet crude to Brent futures.

The tender result, awaited since April, showed that around 45 per cent of the allocated oil was earmarked for companies either based in Nigeria or owned by Nigerian companies, including NNPC subsidiary, Duke Oil, which doubled the size of its contract from last year to 60,000 bpd.

Global oil traders, Glencore, Vitol and Trafigura, firms that have traditionally had a strong presence in the country and last year won the biggest contracts, had their supplies halved to 30,000 bpd.

In 2011, Vitol, Trafigura, Sahara and Glencore received the highest allocations of 60,000bpd, in the contracts that expired on April 30.

Trafigura and Glencore spokesmen declined to comment when contacted, while a Vitol spokesman was not available for comment.

The volumes for Swiss-based traders Gunvor and Mercuria stayed unchanged from 2011 at 30,000 bpd.

Some companies were dropped from this year's list including Italian oil group, ERG, although it was not clear if it had applied.

Other winners included Indian Oil Corp and China's Unipec, the trading arm of Sinopec Corp, which both received 60,000 bpd contracts.

The release of the results of the tender followed the completion of the processing of documents produced by oil traders that submitted applications for the 2012/2013 crude oil lifting contracts.

The processing of the documents came after the May 11, 2012 deadline for submission of applications by interested bidders.

In the initial request for applications from interested bidders, NNPC had set the deadline for April 5 in the notices it released on March 21 and 22, with tough conditions for local companies.

The stringent conditions included at least 10 years' experience in the industry, a minimum annual turnover of $600 million and a $5 million deposit.

But following concerns raised by the Nigerian Content by the Nigerian Content Development and Monitoring Board (NCDMB), NNPC in a fresh notice issued on April 27, extended the deadline for companies to submit applications for crude oil term contracts to May 11 and reviewed the conditions for participation.

The extension was to ensure that more local companies participated in the term contracts, while foreign traders bidding for the contracts complied with the Nigerian Content Act.