Shell and ExonMobil could make a return to Nigeria’s petroleum downstream sector, Bello Rabiu, Chief Operating Officer, Nigerian National Petroleum Corporation (NNPC), told Reuters on the sidelines of an African oil and gas summit in Capetown South Africa Monday, that
According to Rabiu, the two multinationals had exited a few years back but could be lured back in with the prospect of exchanging their crude for petrol on behalf of the Nigerian government.
NNPC signed a similar crude-for-product deal with British Petroleum last Wednesday, in the first of a rash of possible deals Rabiu describes as "stop-gap measures".
According to the official, the country is seeking the most cost effective means of bringing in petroleum products into the country ahead of an expected boom in local refining.
“Unfortunately, Shell and ExxonMobil exited the downstream sector in Nigeria a couple of years ago but they are coming back for this particular arrangement, because it’s an opportunity for them to get crude and sell their products to the refineries,” Rabiu said, explaining that the state-owned corporation hopes to repeat savings of around $1billion it achieved in 2016 with its crude-for-product swaps, as well as in 2019.
“If our refineries are back, which we want in the next 18 months, this thing will stop. So, all these things are just stop-gap measures, but the key issue is that we wanted to import at the least cost before our refineries come back onstream. It is on track and I believe if we don’t sign a final deal (on the project to upgrade refineries) this month of November we will surely sign in December."
As oil prices soared thanks to production cuts by the OPEC plus alliance, the landing cost of petroleum products increased as well. The Nigerian government were however not willing to take the risk of aligning pump prices; petrol importers were thus forced to quit.
Rather than go back to the pre-May 2016 status of issuing subsidies to these marketers, NNPC took up the burden of importation and removed funds it now calls ‘under recovery' from the revenue it remits back to the government. The company uses swap contracts to make its importations. It has entered into direct sale direct purchase agreements with 10 consortiums that include trading houses Vitol, Trafigura , Mercuria and Total.
The present deals were extended to June but several trading sources in the consortiums said they had requested new price terms.
The corporation is in the last lap of conversations with consortiums, including top traders, energy majors and oil services companies to revamp its long-abandoned oil refineries in an effort to reduce its reliance on imported fuel.
Bukola Saraki, Senate President, had asked the state-owned enterprise to present a subsidy budget to the National Assembly earlier in the year, which it had failed to do. That refusal has now catalyzed the initiation of a probe by an ad-hoc committee of the upper chamber.