NNPC Ends Crude Oil Swap Deal in 2023
By Emmanuel Addeh
The Nigerian National Petroleum Corporation (NNPC) has revealed a plan to end the country’s oil-for-fuel swaps system as soon as local refining capacity improves by 2023.
The Group Managing Director of Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, who made the revelation yesterday said with all the government refineries, the Dangote refinery as well as the modular facilities expected to be fully functional latest by 2023, the corporation will end the swap deal, which has been in operation since 2016.
NNPC had a few weeks ago extended its 2019-2020 crude-for-products swap programme, which uses a direct sale-direct purchase (DSDP) mechanism to secure Nigeria’s fuel requirements in exchange for crude, by about six months.
The previous agreement, which expired at the end of September involved 15 trading companies and refiners including BP, Total, Vitol, Gunvor, Trafigura, Mercuria, and Mocoh, along with domestic companies such as Sahara Energy and NNPC’s trading venture Duke Oil.
Speaking during a virtual panel at the African Refiners and Distributors Association annual conference held in Abidjan, with the theme: “Towards Cleaner Fuels for Cleaner Air,” Kyari said he expected NNPC’s refineries to be fully revamped and running again by 2023.
According to him, the corporation was partnering private companies to upgrade the refineries and then run them as part of a drive to process its own oil and cut reliance on imported fuels.
“I don’t see an extension of that process in the near future as we progress and transit into more production locally. Our plan is to deliver all of them by 2023.
“Our banking partners are on top of this. It is a schedule we have agreed with our partners and we believe we can deliver on this,” Kyari said.
On the recent liberalisation of the sector, Kyari maintained that the deregulation of the downstream sector of the oil and gas industry in Nigeria will increase investment in the refining business and facilitate exponential growth in the nation’s refining capacity.
He also advocated deeper collaboration among downstream players across the African continent to provide solutions to challenges of substandard fuels.
He said though the idea of price stabilisation which led to the introduction of fuel subsidy in the 1970s was noble, it had grown into a huge financial burden on the nation’s treasury over the years, necessitating its removal in March 2020.
The NNPC boss stressed that the move will not only free up much-needed cash to fund infrastructural development, but will also eliminate market distortion, foster competition between operators, get more private sector players to build refineries in the country and promote efficiency across the entire value chain.
He said increasing Africa’s refining capacity as well as the quality of fuel required respective refineries to implement sustainable, coordinated pan-African solutions that would meet the target fuel specifications and thus protect the health and wellbeing of African nations and their citizenry.
Kyari said: “It is important to note at this point that the future of our continent does not just lie in our ability to unlock value from our vast natural resources or powering an industrial and economic revolution, but also in our ability to implement proven refining solutions that consider the broader public health implications of our business decisions.”
He said NNPC was making concerted efforts to carry out holistic rehabilitation of its refineries in Port Harcourt, Warri and Kaduna, noting that it was also collaborating with relevant stakeholders to establish modular and condensate refineries as well as supporting private sector establishment of refineries.
“These projects will be in line with the AFRI standards of AFRI-4 specifications of 50 particles per million for diesel and 150 particles per million for gasoline by 2020, and AFRI-5 specification of 50 particles per million of sulphur in gasoline and diesel by 2030 respectively.
“Considering that revamp of petroleum products storage depots and associated pipelines is key to optimal operations of the refineries, the corporation has decided to use a Build, Operate and Transfer (BOT) strategy to restore these facilities using private sector financing,” he said.
According to him, this process has progressed significantly as the process of partner selection was ongoing to ensure sustainability of the refineries post-rehabilitation.
He noted that Nigeria was intensifying the use of natural gas to ensure lower emissions, adding that natural gas has been identified as the fuel of choice for the future as it has the full credentials to support the achievement of the Sustainable Development Goals (SDGs).
The NNPC helmsman also disclosed that the outlook for the downstream sector both in Nigeria and across the African continent looks bright with attractive market conditions.
Kyari listed the presence of a large market, significant crude distillation capacity additions from various refinery projects, improvement of the distribution network and the use of natural gas as other factors that will boost the sector.
He called on the refining professionals across the continent to utilise the abundant opportunities for strategic collaboration across the entire downstream value chain towards delivering value for the continent.
The Executive Secretary of ARA, Mr. Anibor Kragha, in his remarks, applauded the NNPC for its efforts to bolster the continents’ refining capacity, assuring that the association, along with other stakeholders would support the corporation to achieve its objectives.