NNPC Invites Bids from Investors to Lift Crude, Condensate
Nigerian government has called for bids from local and international oil companies to lift Nigerian crude and condensate over 2021.
Nigerian crude is so popular with global refiners because it normally commands a premium to Dated Brent, since they are largely light and sweet.
The peculiar nature of the Nigerian crude makes it rich in gasoline and middle distillates. The Nigerian crude has Asia and Europe as its two main destinations.
According to the Nigerian National Petroleum Corporation (NNPC), who is representing Nigerian government in the bids management, the contract will be valid for a year and the date of submission by 12:00 pm Nigerian time (1100 GMT) Oct. 15.
The tender document issued by the NNPC, specifies that refiners, companies forming part of a government-to-government arrangement, global crude oil traders and “indigenous Nigerian companies engaged in Nigerian oil and gas downstream activities” can apply.
The current Nigerian crude oil term contracts (2018-20) involve the export of around 1 million b/d of crude and condensate, out of the 2.2 million b/d Nigeria has the capacity to produce.
The guidelines said the crude will continue to be sold on a FOB basis, “subject to the execution of a sales and purchase agreement with selected buyers.”
Sources said the current contract, which had been expected to expire in mid-2020, will be rolled over until the end of the year.
It was gathered that the current 2018-20 crude term contracts are held by more than 60 recipients, making it the largest list Nigeria has ever allocated.
Platts reports that a sizeable chunk of these are domestic Nigerian companies that are new to the world of international oil trading. “As a result, a lot of these firms have transferred their allocation to bigger trading companies with more experience and connections with end-consumer markets,” S&P Global Platts said in report yesterday.
Oil major Total, along with international oil trading companies Trafigura, Vitol and Glencore, Azerbaijan’s Socar, India’s International Oil Corporation and Russian Lukoil’s trading arm Litasco are some of the companies included in the 2018-20 NNPC term contract list, according to a copy of the list seen by S&P Global Platts.
The agency observed that Nigeria had seen its oil output fall in 2020 due to the oil price crash amid the coronavirus pandemic and it now is under pressure to adhere to the OPEC+ output cuts.
Nigerian crude oil production has averaged 1.76 million b/d for the first seven months of this year compared with 1.90 million b/d in 2019.
According to S&P Global Platts estimates, Nigeria has already had to cut back its oil production as it faced up to the double whammy of a lack of buyers and storage facilities. This is even as oil prices recovered from 21-year lows in April.
Crude output is currently around 1.50-1.60 million b/d, according to S&P Global Platts estimates, well below the country’s capacity of 2.2 million b/d.
Oil production has, however, rebounded steadily over the past three years, after it almost halved to 1.1 million b/d in 2016-17 due to renewed militancy in the Niger Delta, the report said, adding that Nigeria’s compliance with OPEC+ cuts has sometimes drawn the ire of some of its fellow OPEC members.
Platts said under the latest OPEC+ deal, Nigeria had committed to keeping its crude output at 1.412 million b/d in May, June and July, down 417,000 b/d from its baseline of 1.829 million b/d. From August through December, it is obliged to pump 1.495 million b/d, while from January 2021 to April 2022 it will cap production at 1.579 million b/d.
By Chibisi Ohakah, Abuja