Abuja — The Nigerian National Petroleum Corporation (NNPC) has completed arrangements to sign a $6 billion worth of deals to exchange more than 300,000 barrels per day (bpd) of crude oil for imported premium motor spirit (PMS) otherwise known as petrol and diesel.
The decision to reverse to the crude oil-for-product deal commonly referred to as SWAP may not be unconnected to the inability of the local refinery to function as well as the inability of independent petroleum marketers to import finished products.
The NNPC is said to be solely importing 95 per cent of products consumed across the country presently as independent marketers blamed huge outstanding debts and lack of foreign exchange (FOREX) for refusal to import.
The contracts are to come three months later than expected, even as three more pairs of companies are included thereby increasing the number of participating companies than that of last year.
A lack of local refining capacity means Nigeria is reliant on imported gasoline, kerosene and other petroleum products. The oil price crash and militant attacks on Nigeria's oil industry have starved independent marketers of dollars for fuel imports.
Sources close to NNPC told Reuters that at least four of the 10 groups of companies involved have signed contracts and are set to begin from July 1, with the rest expected to do so today.
Meanwhile, the NNPC, which is due to approve the contracts, did not immediately respond to a request for comment.
The fuel quality in the final agreements was not immediately clear, but July 1 is the same deadline the country set for switching over to higher quality, lower-sulphur fuels that create less toxic fumes.
Sources said Sulphur levels were the major point in the negotiations. The Ministry of Environment and the Standards Organization of Nigeria, responsible for setting requirements for imported goods, promised a switch to 150 ppm gasoline and 50 ppm diesel.
While according to some sources, new standards would be applied, others reported that three different gasoline specifications-1,500 ppm, 500 ppm and 150 ppm-would all be included in the contracts, giving NNPC options on which to import.
This year's deal includes international trading houses, not just oil refineries. The 2016 contracts included only companies with refineries in an effort to cut out middlemen.
The latest list contains several companies from 2016, including Varo Energy, Societe Ivorienne de Raffinage (SIR), Total and Cepsa. Italy's ENI and India's Essar, which won 2016 contracts, are absent from this year's list but Socar and Mercuria are new additions.
The contracts were initially planned to begin in April but last year's swap deals were extended at least twice in order to give the NNPC more time to negotiate. NNPC had previously said this year's contracts would exchange up to 800,000 bpd of crude oil, though at some 40 percent of peak exports that target was seen by markets as unlikely.
In another development, General Electric (GE) has said it plans to launch a gas turbine assembly plant in the country next year and has invested over $100 million as it seeks to tap growing demand for gas-fired power plants in Africa's biggest economy.
GE's CEO, Lazarus Angbazo, said the company wants to support the development of Nigeria's gas reserve which is largely untapped, adding that the U.S. company has invested in some local power plants.