A Direct-Sale–Direct-Purchase (DSDP) arrangement, which will save the government one billion dollars, will next month replace the Crude Oil Swap initiative, the Minister of State for Petroleum Resources and Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Ibe Kachikwu, disclosed today in Abuja.
Dr. Kachikwu was speaking during an appearance before the House of Representatives Ad-Hoc Committee set up to investigate NNPC’s offshore processing and crude swap arrangement in existence since 2010, according to a press statement signed by corporation spokesman Ohi Alegbe.
The Minister told the committee that the DSDP will introduce and entrench transparency into the crude oil for product transaction by the Corporation in line with global best practices.
Under the old order, crude oil was exchanged for petroleum products through third party traders at a pre-determined yield pattern.
The Minister stated that the DSDP option eliminates all the cost elements of middlemen and gives the NNPC the latitude to take control of sale and purchase of the crude oil transaction with its partners.
“When I assumed duty as the GMD of NNPC, I met the Offshore Processing Arrangement (OPA) and like you know there is always room for improvement,” he said. “I and my team came up with the DSDP initiative with the aim of throwing open the bidding process. This initiative has brought transparency into the crude-for-product exchange matrix and it is in tandem with global best practices.”
He noted that the DSDP initiative will whittle down the influence of the Minister in the selection of bid winners as it would allow all the bidders to be assessed transparently based on their global and national track record of performance, before the best companies with the requisite capacities are selected.
Throwing more light on the need for the introduction of the DSDP, Dr. Kachikwu noted that the policy is aimed at reducing the gaps inherent in the OPA and the losses incurred by the NNPC in the past.
He stated that the new arrangement would help the Corporation to grow indigenous capacity in the international crude oil business and generate employment opportunities for indigenous companies that are selected.
The Minister further stated that the DSDP initiative gives other government agencies such as the Bureau of Public Procurement and the Nigeria Extractive Industry and Transparency Initiative the opportunity to be a part of the bidding process in order to engender adherence to due process.
Speaking on some of the reported misgivings by some federal agencies over the alleged non-transparent nature of past crude-for-products exchange arrangements, the Minister assured that the reconciliation process was ongoing and that in the future, the Ministry would deploy technology to track cargoes and transshipment at the reception depots in order to forestall round-tripping.
Dr. Kachikwu also announced that the price modulation policy has rid the Federal Government of the burden of subsidy on imported petroleum products in January 2016.