State-run oil firm, the Nigerian National Petroleum Corporation (NNPC) is set to sign a $6 billion deal to swap more than 300,000 barrels per day (bpd) of crude oil for imported petrol and diesel, it was gathered yesterday.
According to Reuters, the contracts, which come three months later than expected, include three more pairs of firms than last year, reflecting the country’s increased reliance on NNPC for fuel imports to run the local economy.
A lack of local refining capacity means the country is reliant on imported gasoline, kerosene and other petroleum products, and the oil price crash and militant attacks on oil industry have starved independents of dollars for fuel imports.
At least four of the 10 groups have signed contracts, set to begin from July 1, with the rest expected to do so today, sources with direct knowledge of the process confirmed to Reuters.
The NNPC, which is due to approve them by the end of the week, did not immediately respond to a request for comment.
The fuel quality in the final agreements was not immediately clear, but July 1 is the same deadline the country set for switching over to higher quality, lower-sulphur fuels that create less toxic fumes.
Sulphur levels were a major sticking point in the negotiations. The Ministry of Environment and the Standards Organisation of Nigeria (SON), the body responsible for setting requirements for imported goods, promised a switch to 150 ppmgasoline and 50 ppm diesel.
Some sources said the new standards would be applied. Others reported that three different gasoline specifications – 1,500 ppm, 500 ppm and 150 ppm – would all be included in the contracts, giving NNPC options on which to import.
This year’s deal includes international trading houses, not just oil refineries. The 2016 contracts included only companies with refineries in an effort to cut out middlemen.
The latest list contains several firms from last year, including Varo Energy, SocieteIvorienne de Raffinage (SIR), Total and Cepsa. Italy’s ENI and India’s Essar, which won 2016 contracts, are absent from this year’s list. Socar and Mercuria are new additions.
The contracts were initially planned to begin in April but last year’s swap deals were extended at least twice to give NNPC more time to negotiate. NNPC had previously said this year’s contracts would exchange up to 800,000 bpd of crude oil, though at some 40 percent of peak exports that target was seen by markets as unlikely.
NNPC has been forced to ramp up its own fuel imports to around 80 per cent of Nigeria’s consumption, according to figures from the company and oil traders.
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