NNPC: Saudi Arabia’s Price Cut Not a Threat to Nigeria’s Oil Sale

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• Claims retention of committed oil off-takers, market
Chineme Okafor in Abuja

Nigeria is not in any price war or struggle for market share for crude oil with Saudi Arabia, top official sources at the Nigerian National Petroleum Corporation (NNPC) told THISDAY yesterday in Abuja.

The sources stated that the country has a satisfactory hold on its crude oil off-takers in both Asia and Europe, as well as other market destinations for its oil, and as such cannot be in contention with the Saudis.
Recently, Saudi’s Aramco disclosed that it has priced its September shipments to its Asian customers at $1.10 below the continent’s benchmark. Bloomberg reported that the discount was $1.30 lower than the price for August shipments and 10 cents lower than estimates made by refiners and commodity traders it polled.

But one top official source at NNPC told the paper that the corporation was not disturbed by the recent market decision of Saudi Aramco to discount its future oil sales to its Asian customers in a bid to gain more market share.
He maintained that the NNPC has its market intact, but refused to disclose further details on this. According to him, it was confidential trade information he would not divulge.
Another official source who also spoke with THISDAY on the development said even with the discount, Nigeria still has off-takers who are loyal to its Bonny Light crude.

He disclosed that these off-takers often get unannounced discounts on crude oil sales to them, adding that NNPC has firmly committed crude oil contracts with them.
The NNPC sources also stated that other than the country’s current challenges of keeping her production stable due primarily to facility vandalism in the Niger Delta, the corporation was quite comfortable with its existing crude oil transactions.

“For us the primary focus is on production because of the challenges we have in the Delta, we have contracts that are firmly committed,” said one of the anonymous sources.
He further explained: “Standard industry practice or sales practice is that you react to what is happening in the market place, but we have some advantage here.

“The Saudis have similar advantage but the quality of our crude – the Bonny Light, is highly sought after around the world and every now and then we find ourselves in a situation where we have to do a bit more discounting but it doesn’t have to be as deep as some of these other countries.”

The source also failed to provide more details on NNPC’s customers and the sort of discounts they get from their trade with the corporation. He rather preferred to say: “Other than the challenges from the Niger Delta, we still have some level of comfort and we are not that desperate. Our focus is getting production level to 2.2 million barrels per day.”

Similarly, the other source said what the Saudis had done was transactional and driven by supply outstripping demands, or possible desperation for more market shares. According to him, Nigeria was not in that sort of competition with the Saudis.

He noted that Nigeria does not have oil volumes that could be hanging and looking for buyers on spot markets because the federation’s volume was divided between sales and purchase of refined products.
“If at the price you are selling, people are ready to offtake in full, there is no real desperation or real need (for discounts).

“Our production is even cut in between because from what we produce, we use quite a bit of it to import refined products and what you will ultimately call federation volume is not significant because the JV partners also have their own part of the produced volumes.

“At the end of the day, what is actually spun off for the federation is somewhere around one million barrels and so it is not a big volume that you can compare to Saudi who have massive volumes to sell. What we have to ultimately sell is not a massive volume,” he stated.

To buttress his claim that the country was not bothered by Aramco’s market decision, he referred the paper to a recent meeting the NNPC had with a delegation from Spain.

The meeting, he said was to deepen the corporation’s trade relationship with Spain who he averred were looking to do away with middlemen and establish direct crude oil deal with NNPC.
Spain, he noted, refines about one million barrels of oil every day, and wants to directly source for a greater volume of that from Nigeria.

“We don’t do spot contracts anymore. When the crude term contracts are tendered, we actually commit a 100 per cent of the spare volumes to that deal, and so we have confirmed guaranteed off takers of our crude.
“Spain is not one of our confirmed guaranteed off takers, they buy indirectly and they have been reaching out to us, they want a direct relationship with the NNPC and we met with their delegation last week.

“If the term contract come out again because the tender is expected out sometime around October, they will be bidding directly and may be lucky to be part of it because they refine about one million barrels every day. If they are lucky and get it, that also secures our barrels.
He said on Nigeria’s current production that, “at the moment, we are somewhere around 1.9 million barrels every day.”