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THE NIGERIAN NATIONAL PETROLEUM CORPORATION (NNPC) RELEASES 2019 GUIDELINES FOR CRUDE OIL SWAP CONTRACT

posted 5 years ago

The Nigerian
National Petroleum Corporation (NNPC) Wednesday unveiled the guidelines for its
crude oil-for-product swap programme, known as the Direct Sale and Direct
Purchase (DSDP) scheme. The corporation in a tweet message on its official
twitter handle @NNPCgroup, disclosed that it will engage qualified refineries,
oil traders, as well as local downstream operators in the 2019 DSDP programme.

NNPC did not
state the volume of crude oil it would put into the DSDP programme but usually
allocates 445,000 barrels of oil a day from Nigeria’s daily production figures
to take care of the country’s daily products consumption. This volume is also
often used by it in its crude oil for product swap programmes, including the
DSDP.

According to the
corporation, the invitation of participants in the swap contract was in line
with Nigeria’s public contract and procurement law – the Public Procurement Act
2007, as well as its policy and procedures on same. It said the decision to
engage qualified and credible companies in the DSDP programme was to ensure
sustained product supply in the country.

The corporation
added that the programme would deliver monthly crude oil lifting on Free on
Board (FOB) basis to suppliers who shall in return deliver petroleum products
of Nigerian standard specification to it on Delivered at Place (DAP) basis, at
designated safe ports in Nigeria. NNPC equally stated that the petroleum
products to be delivered shall be equivalent in value to the crude oil received
from it by the suppliers.

NNPC described
the company that will be eligible to participate in the swap scheme, as: “An
established international end user who owns a refinery with the capacity to
process Nigerian crude oil grades and has a Nigerian affiliate or subsidiary
experienced in downstream oil and gas business or in partnership with an
experienced Nigerian company engaged in downstream oil and gas business
particularly petroleum products trading.

“An established and globally recognised large
volume petroleum product trading company and has a Nigerian affiliate or
subsidiary experienced in downstream oil and gas business or in partnership
with an experienced Nigerian company engaged in downstream oil and gas business
particularly petroleum products trading.” It also added that: “An Indigenous
company engaged in Nigerian oil and gas downstream activities with trading of
petroleum product expertise,” would be allowed to participate.

The duration of the swap contract, it said, would
be for a 12 calendar month, that is, between 2019 and 2020. It said
participating companies must provide legal evidence of their existence; tax
clearance; compliance with Nigeria’s pension law; the country’s social
insurance law; as well as registration on the Bureau of Public Procurement
(BPP’s) National Data Base of Federal Contractors, Consultants and Service
Providers (NDCCSPs).

With regards to financial requirements, it said:
“Minimum turnover of $500 million (or the naira equivalent) and net worth of
$250 million (or the naira equivalent) for the year 2017 or 2018 whichever is
the current financial year.” It added that foreign companies applying shall be
required to demonstrate evidence of partnership with experienced Nigerian
downstream company that meets a minimum turnover of $65 million and net worth
of $32.5 million, while indigenous companies shall meet the minimum turnover of
$400 million and net worth of $200 million.

Nigeria’s state
owned refineries have badly underperformed over the years due to their decrepit
state, and are unable to meet the country’s domestic needs, making the country
almost wholly dependent on imports with the attendant depletion of hard-earned
foreign exchange. This has given rise to crude for product swaps as a more
efficient means of addressing this deficit.

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