Direct-sale, direct-purchase to replace crude swap arrangement – Kachikwu

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The Minister of State for Petroleum Resources and Group Managing Director of the Nigerian National Petroleum Corporation, Dr. Ibe Kachikwu, has said that the crude-for-products exchange arrangement popularly referred to as crude swap will be replaced by a Direct-Sale–Direct-Purchase arrangement which would take off next month.

Kachikwu disclosed this when he appeared before the House of Representatives Ad-Hoc Committee set up to investigate the corporation’s offshore processing and c arrangement for the period between 2010 to date.

Also Read: Oil sawp: Reps caution Kachikwu

He noted that the DSDP was adopted to replace the Crude Oil Swap initiative and the Offshore Processing Arrangement so as to introduce and entrench transparency into the crude oil for product transaction by the NNPC 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 adding that the initiative would save $1bn for the Federal Government.

Also Read: 34 Firms Win NNPC Crude-For-Fuel Swap Contracts Awards

“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,” Kachikwu 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”

Also Read: NNPC issues directives on 2019-2020 crude-for-crude swap tender

According to him, the DSDP initiative whittles down the influence of the Minister in the selection of bid winners as it allows 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.

Also Read: Shell, ExxonMobil to sign crude swap deal with NNPC

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 informed that the DSDP initiative gives other government agencies such as the Bureau of Public Procurement (BPP) and Nigeria Extractive Industry and Transparency Initiative (NEITI) the opportunity to be a part of the bidding process in order to engender adherence to due process.

Also Read: Direct sales now guarantees premium value on product transactions – NNPC

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 going forward the Ministry would deploy technology to track cargoes and transshipment at the reception depots in order to forestall any incidence of round tripping.

Dr. Kachikwu announced that the price modulation policy has rid the Federal Government of the burden of subsidy on imported petroleum products in January 2016.

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