10 January 2018

Nigeria's Oil Production Hits 2.25mbd As 254 Firms Submit Bids for 2018/2019 Term Contracts

Abuja — Nigeria's daily crude oil production with condensates has increased to 2.25 million barrels per day (mbd), but with crude oil production alone standing at 1.8mbd, while condensates are 450,000 barrels per day (bd), the Nigerian National Petroleum Corporation (NNPC) has disclosed.

The NNPC also disclosed on Tuesday in Abuja that it had received 254 applications from oil trading firms, refineries and other national oil companies, interested in the 2018 to 2019 term contract to lift and sell Nigeria's crude oil blends for the periods.

NNPC's Group Managing Director, Dr. Maikanti Baru, said shortly after declaring open the bid opening and evaluation exercise, the firms would be trimmed down to an acceptable number after evaluations of their bids are completed in the next three to four weeks, and given up to 40 cargoes of Nigeria's oil to lift and sell in the international market every month.

Baru said this was equivalent to the volume of crude oil the corporation put out in its 2016 to 2017 crude oil term contract and which 39 successful bidders emerged.

He also noted that going forward, the NNPC would demand to know the real owners and beneficial owners of companies that participate in its crude oil term contract as a new requirement to avoid trading with companies and individuals with questionable backgrounds.

"For crude oilproduction without condensate, we've gone up significantly today. We have about 1.8 million barrels per day without condensate. If you add condensate, we make about 2.25 million barrels per day. So, there is significant improvement," Baru said.

He further said on the volume of oil to be lifted in the term contract: "It's about the volume that we had last year, we have about 40 cargoes on a monthly basis. The number of bidders that submitted this year is 254."

Continuing on the term contract, Baru explained that "after evaluation, which will take about three to four weeks, we will get the consent, and once we get the approval, we will announce the winners.

"The beneficial owners being talked about refer to the company or the directors. We want to be sure, but in terms of reputation, we do not get our goods in the hands of companies that have directors with questionable characters."

He also said the corporation would go ahead to conduct another crude oil term contract in 2019 and 2020, as against disclosures in 2016 that it was looking to exit the practice for a longer term stable contract.

According to him, "I think the nature of commodity trading is that in some cases, you even do it at shorter periods because of the shared volume that is concerned. We continuously do refresh the bidders 'position or lifters' position on yearly basis because we think that there are opportunities for other players that could come in and we don't want to shut them down. For now, we will do another term contract for 2019/2020."

Speaking on interests in Nigeria's crude oil blends, Baru claimed that demands for the country's oil from North America was coming up again, and that supplies to the continent in 2017 was about 16.5 per cent.

"Contrary to people's perception and because of the shale oil that had taken up most of the markets of Nigerian crude oil, which, of course was the perception that we had about two years ago, in fact in 2016, we had very low export, particularly to the US. But last year, we had up to 16.5 per cent, to be precise of our crude oil going to North America," he stated.

Europe and Asia, the NNPC explained, still remained the most preferred destinations for Nigeria's crude oil with 36 per cent and 26 per cent of supplies going to them respectively.

Similarly, the Group General Manager, Crude Oil Marketing Division (COMD) of the corporation, Mr. Melee Kyari, said the bid process was fully automated and made to withstand possibilities of tampering.

Kyari stated: "There would be no lobbying in the lifting programmes. It is fully automated. The customer knows where and when they get their liftings and this is unparalleled."

He noted that parts of the procedure was that the companies selected had to have a net worth of $250 million, turnover of $500 million, an irrevocable letter of credit with their banks and years of experience.

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