TheCable

Dwindling crude production has forced the Nigerian National Petroleum Company (NNPC) Limited to set up a new contract deal with local oil importers.

The deal will also see NNPC holding up payment for crude supplied by at least three months.

This is coming as the country’s crude volume can no longer cater for the direct sale direct purchase deal between NNPC and local oil importers as well as meet local demands.

NNPC imports all its petrol, swapping most for crude with international traders, including Vitol Group and TotalEnergies as well as domestic groups such as Sahara Group Limited and Oando Plc.

TheCable had reported that oil production decreased to an average of 937,766 bpd in September as the government blamed the steady decline on massive theft and pipeline vandalism.

Confirming the new arrangement, Mele Kyari, group chief executive officer (GCEO) of NNPC, told Bloomberg that the state-owned oil firm asked local importers to permit payment delays of at least 90 days. 

Kyari said the new deals would involve “a longer credit period”.

He expressed confidence that a rebound in Nigeria’s crude production will allow the company to cover its deferred payment obligations. 

The NNPC GMD said he expects the country to add 500,000 barrels a day to its output by the end of November, mainly by restarting activities on the Shell Plc-operated Forcados export terminal and Trans Niger pipeline.

“We will meet all the deliveries and still have surplus crude production for cash,” Kyari told Bloomberg.

“They know we can pay. Otherwise, they wouldn’t supply.”

The new contracts operate alongside the original “direct sale, direct purchase” deals, under which NNPC is expected to provide crude before traders deliver the fuel, according to the report. 

The companies involved in those new contracts are Sahara, Oando, MRS Oil and Duke Oil, a subsidiary of NNPC.

‘NEW ARRANGEMENT AT A PREMIUM’ 

A source told TheCable that the oil firms have agreed to deal, but “at a premium as high as $30”.

“So, Oando, Vitol and others will give gasoline and agree to collect crude in 90-120days at a premium per ton of gasoline and can be high as $30,” the source told TheCable.

TheCable understands that there is still contemplation on whoever decides that premium and if it is competitive.

While the original deals still account for the biggest source of Nigeria’s gasoline, the new contracts represented almost a third of the deliveries in the first seven months of the year.

Since December, ad-hoc purchases by NNPC have accounted for 13 percent of total volumes.

NNPC imports about 1.3 million tons of petrol per month, against which it commits about 320,000 barrels a day of crude to the swaps, Bloomberg quoted the company data.

In March and April 2022, the report added that Nigeria’s fuel imports were more than 50 percent.