The Nigerian National Petroleum Corporation (NNPC) on Thursday announced the cancellation of the terms of contract for the delivery of crude oil to the refineries in Warri, Port Harcourt and Kaduna. The corporation also announced the termination of the Offshore Processing Agreements with three companies – Duke Oil Company Inc, Aiteo Energy Resources Limited and Sahara Energy Resources Limited. The agreements were sealed in January, 2015.
Under the agreement, the 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. The corporation said the decision to cancel the oil delivery contracts to refineries was taken after a proper evaluation of the contract terms, adding that the cancellation was due to exorbitant cost and inappropriate process of engagement.
The firm said the new measures were aimed at cost reduction and to strengthen operational efficiency across its value chain. The corporation noted that as a stop-gap measure, the NIDAS Marine Limited, a subsidiary of the NNPC, had been engaged to provide crude delivery service on a negotiated industry standard rate.
The corporation, in a statement issued by its Group General Manager, Group Public Affairs Division, Mr. Ohi Alegbe, said:
“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 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.
On the OPA arrangement, the firm said the current agreement was not in the interest of Nigeria and the national oil firm, a development that led to its cancellation. The firm said:
“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.”
The NNPC also observed that the structure of the agreement did not guarantee unimpeded supply of petroleum products as delivery terms were not optimal. To address these lapses, the NNPC said that it had commenced the process of establishing alternative OPA based on optimum yield pattern with tender processing fees. It said:
“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.”
On the status of the crude for product exchange agreement, otherwise known as SWAP, which was reportedly entered into by the NNPC and some oil traders, the corporation informed that the last SWAP arrangement lapsed in December 2014 and was never renewed.
The NNPC also stated that it had 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.
It noted that the process, which would commence with the advertisement of the crude oil term contract in both national and international print media for a period of one month, had been carefully structured to weed out ‘briefcase companies’ and rent seekers.