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NNPC Cancels Contract For Delivery Of Crude Oil To Refineries

The Nigerian National Petroleum Corporation (NNPC) on Thursday announced cancelation of the current contract for delivery of crude oil to the nation’s refineries in Warri, Port Harcourt and Kaduna, citing “exorbitant cost and inappropriate process of engagement.” 

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It has also terminated Offshore Processing Agreements (OPA) entered into last January with Duke Oil Company Inc., Aiteo Energy Resources Limited and Sahara Energy Resources (Nig) Ltd., and begun a new process to engage new off-takers for 2015/16 crude oil term contracts.

In a press statement signed by Ohi Alegbe of the Group Public Affairs Division, the corporation said its new measures are aimed at cost reduction and strengthening of operational efficiency.  It added that the measures followed proper evaluation, and are in line with the terms of the contract for the delivery of crude oil to the refineries. 

The corporation noted that as a stop-gap measure, NIDAS Marine Limited, a subsidiary, has been engaged to provide crude delivery service on negotiated industry standard rate pending the establishment of substantive contract.

``We have also commenced a rigorous and transparent process of securing capable and competitive contractors for the delivery of crude oil by marine vessels to Port Harcourt and Warri/Kaduna Refineries pending the restoration of the Crude Pipeline infrastructure,’’ the corporation stated.     

The NNPC explained that it resorted to the delivery of crude oil to the refineries by marine vessels following incessant attacks on the Bonny-Port Harcourt refinery pipeline and the Escravos crude pipelines by vandals and oil thieves resulting in the complete unavailability of the pipelines in 2013.

With reference to the termination of the existing OPA with the three companies the corporation said the agreement NNPC allocates a total of 210, 000 barrels of crude oil per day for refining at offshore locations in exchange for petroleum products at pre-agreed yield pattern.

“However after detailed appraisal of the operation and its terms of agreement, the NNPC is convinced that the current OPA is skewed in favour of the companies such that the value of product delivered is significantly lower than the equivalent crude oil allocated for the programme,’’ it said.

The NNPC also observed that the structure of the agreement does not guarantee unimpeded supply of petroleum products, as delivery terms were not optimal.  In other to address those lapses, the corporation said it had commenced the process of establishing alternative OPA based on optimum yield pattern with tender processing fees.

“After due appraisal of performance trajectory, we have invited Messrs. Oando, Sahara Energy, Calson, MRS, Duke Oil, BP/Nigermed and Total Trading to bid for the new Offshore Processing Agreement while we have engaged AITEO, Sahara Energy and Duke Oil to exit the current OPA,’’ the NNPC stated.

On the status of the crude for product exchange agreement (SWAP) reportedly entered into by the NNPC and some oil traders, the Corporation disclosed that the last SWAP arrangement lapsed in December 2014 and was never renewed.

The NNPC also informed that it has obtained the permission of President Muhammadu Buhari to kick-start the tendering process for the 2015/2016 Crude Oil Term Contract for the evacuation of Nigeria’s crude oil equity from the various crude and condensate production arrangements.

The Corporation noted that the process, which will commence with the advertisement of the Crude Oil Term contract in both the national and international print media for a period of one month, has been carefully structured to weed out “briefcase companies’’ and rent seekers.

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