Nigeria’s NNPC finalises new crude-for-fuel swaps for one year -sources

The Nigeria’s state oil firm, Nigerian National Petroleum Corporation (NNPC) has picked 16 consortia for its new crude-for-fuel swap contracts for one year starting in August.

The list includes major Swiss trading firms Trafigura, Vitol and Mercuria, oil major Total as well as large Nigerian traders Sahara Energy, Oando (OANDO.LG) and MRS Oil. Other companies which qualified for the contracts include: AY Mai Kifi, based in Kano; Litasco, a South African firm; Bono Energy, Lagos; Duke Oil, an NNPC subsidiary; Eyrie Energy, based in Abuja; Asian Energy Services; Prudent; BP and Mocoh.

The contracts, known as Direct Sale, Direct Purchase (DSDP), are coveted since they are used to supply nearly all of Nigeria’s petrol needs as well as cover some of its diesel and jet fuel consumption.

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DSDP mechanism

Each consortium would receive 20,000 barrels per day of crude oil in exchange for products, making the combined total 320,000 barrels per day of Nigeria’s output. The West African nation and OPEC member produced about 1.5 million bpd of crude in April.

The companies were invited on to submit commercial bids list of winners is unlikely to change substantially. The list was still being finalised and the new DSDPs will replace those from 2019 which were extended until mid-2021.

If a foreign oil company wins, it will be paired with at least one local firm.  NNPC uses a DSDP mechanism to secure Nigeria’s fuel requirements in exchange for crude, a practice that has gone on for years as all the country’s refineries have remained comatose. According to NNPC Group Managing Director, Mallam Mele Kyari, the DSDP had resulted in savings of more than US $1bn a year since its introduction.

Nigeria relies almost entirely on imports to meet oil product demand because of significant and prolonged operational problems at its 445,000 bpd of refining capacity. The country consumes over 350,000 bpd of petrol with the majority sourced from Europe.