After a long wait for oil supply tenders submitted March, the Federal Government will award nearly half of its $60 billion annual supply contracts to local companies, a document showed, and cut supplies to major commodity traders such as Glencore, reported Reuters yesterday.
Nigeria, a member of the Organisation of Petroleum Exporting Countries (OPEC) has allocated about three-quarters of its daily production or around 1.6 million barrels per day (bpd) via term contracts to 50 companies including 21 Nigerian firms, a document sent to winning firms showed.
According to the Reuters report, the oil, which amounts to around 580 million barrels sold over the next 12 months is worth nearly $60 billion based on current premiums of the country’s light, sweet crude to Brent futures. Alexandra Gillies, Head of Governance at Revenue Watch Institute, said the list of companies should be scrutinised carefully to ensure that all are operational oil firms and were fairly chosen.
“The desire to encourage Nigerian participation is understandable, but it only helps the country if these are legitimate companies, chosen in a manner that was competitive and free from patronage,” she said.
Nigeria is unusual among major producers in that it allows international trading houses to compete alongside refiners and state oil firms in the annual contracts. “The first thing you notice is that this isn’t a significantly shorter list, so the promise to simplify and streamline hasn’t been met,” said an Abuja-based oil industry source who confirmed the contents of the document.
“On the surface, many of the public’s concerns haven’t been dealt with.”
The tender result, awaited since April, showed that around 45 percent of the allocated oil was earmarked for companies either based in Nigeria or owned by Nigerian companies including state oil firm NNPC’s subsidiary Duke Oil, which doubled the size of its contract from last year to 60,000 bpd.
Industry sources expressed surprise at the number of small Nigerian firms on the list after government pledges to cut back on cronyism in the sector and the introduction of tough new entry requirements for this year’s tender.
Global oil traders Glencore, Vitol and Trafigura, firms that have traditionally had a strong presence in the West African country and last year won the biggest contracts, had their supplies halved to 30,000 bpd.
Trafigura and Glencore spokesmen declined to comment and a Vitol spokesman was not available for comment.
The volumes for Swiss-based traders Gunvor and Mercuria stayed unchanged from 2011 at 30,000 bpd.
NNPC hardened the qualification terms for the supply contracts when it first released the tender document in March as part of a drive to reform the sector.
These included at least 10 years’ experience in the industry, a minimum annual turnover of $600 million and a $5 million deposit, and were expected to help large international traders at the expense of local firms.
But the number of companies on the list grew from last year’s 45 and included many small African firms such as Tempo and Benny Peters, the document showed.
“They (Nigeria) faced pressure and had to increase the list by around 20 companies. It was likely a struggle of back and forth and that also delayed the process,” said a trader with a company that won a contract.
The deadline for submissions was extended in April.
It sells the rest of its 2.2 million bpd of production through equity holders such as oil majors Total and Royal Dutch Shell.
Some companies were dropped from this year’s list including Italian oil group ERG, although it was not clear it had applied.
Other winners included Indian Oil Corp and China’s Unipec, the trading arm of Sinopec Corp, which both received 60,000-bpd contracts.