Oil Companies in Nigeria now have a new opportunity to invest in the sector as the Nigerian National Petroleum Corporation, NNPC, opens bid for 2012 contracts for cargo lifting oil

Many companies in the oil and gas sector, now have the opportunity to cargo-lift Nigerian oil. The federal government has opened a bid process for the 2012 contracts scheduled to start in June. The Nigerian National Petroleum Corporation, NNPC, which is in charge of the tender process, said that refiners, trading companies and local international oil companies could submit bids expected to end by April 5.

NNPC did not specify the volume of oil to be awarded in the 2012 contracts, but stated that it planned to maintain regional balance in the distribution of oil to Africa, Asia, Europe, North and South America.

According to NNPC, applicants must provide evidence of at least 10 years’ experience in the industry, a requirement seen as a measure to check cronyism and possibly reduce the number of companies involved in oil lifting.  Also, companies must have an annual turnover of $600 million and should be able to pay a $5 million deposit before lifting the first cargo.

Newswatch learnt that this year’s list of winners would be trimmed by a third. In 2011, NNPC awarded about 1.5 million barrels per day, more than half of the country’s oil production, with the biggest contracts going to foreign oil trading companies such as Glencore, Vitol and Trafigura. But in other oil producing countries, largest buyers of oil are the refiners.

The open bid may be a fallout of the five-day strike embarked upon by civil society organisations in January to protest the hike in the pump price of petrol from N65 to N142 per litres which was later reduced to N97. During the protest, Nigerians had accused the government of inability to fight corruption in the petroleum sector. This year’s open bid is an improvement of the earlier contract reached with Dutch-based Trafigura, which lifted 120,000 barrels of crude oil per day in exchange for refined products such as gasoline and gas oil of equivalent value estimated at $3 billion a year. 

The multi-billion dollar oil deal between Nigeria and Trafigura was not advertised. Top officials of the NNPC were said to have capitalised on the busy schedule of President Goodluck Jonathan, when he declared his interest to contest for the office of the president in the April 2011 polls, to seal the deal behind him. But NNPC said the agreement with Trafigura was in line with international standard. According to Levi Ajuonuma, group general manager, group public affairs division, NNPC, the contract was done to pre-empt fuel products scarcity because of the constant threat posed to pipelines by militants and pipeline vandals.

Nigeria currently imports most of its petroleum products, as its four refineries work far below their installed capacity of 445,000 barrels per day. The refining output is insignificant when compared with the national demand of about 40 million litres per day.