• Again, prices near $70
By Emmanuel Addeh in Abuja with agency report
The Nigerian National Petroleum Corporation (NNPC) has picked 16 consortia for its new crude-for-fuel swap contracts for one year starting in August.
A report yesterday by Reuters listed the consortia to include major Swiss trading firms, Trafigura, Vitol and Mercuria, oil major Total as well as large Nigerian traders, Sahara Energy, Oando and MRS Oil.
Other companies which qualified for the contracts, according to a list sighted by THISDAY include: AY Mai Kifi, based in Kano; Litasco, a South African firm; Bono Energy, Lagos; Duke Oil, an NNPC subsidiary; Eyrie Energy, based in Abuja; Asian Energy Services; Prudent; BP and Mocoh.
The contracts, known as Direct Sale, Direct Purchase (DSDP), are coveted since they are used to supply nearly all of Nigeria’s petrol needs as well as cover some of its diesel and jet fuel consumption.
The companies were invited on Friday to submit commercial bids, which were due on Tuesday, according to the report.
Those involved in the process said the list of winners was unlikely to change substantially, with the new DSDPs expected to replace those from 2019, which were extended until mid-2021.
Traditionally, if a foreign oil company wins, then it is typically paired with at least one local firm.
NNPC uses a DSDP mechanism to secure Nigeria’s fuel requirements in exchange for crude, a practice that has gone on for years as all the country’s refineries have remained comatose.
In an interview last year, NNPC Group Managing Director, Mallam Mele Kyari, said the DSDP had resulted in savings of more than $1 billion a year since its introduction.
Nigeria relies almost entirely on imports to meet oil product demand because of significant and prolonged operational problems at its 445,000 bpd of refining capacity.
The country consumes over 350,000 bpd of petrol with the majority sourced from Europe.
Meanwhile, oil prices rose yesterday on signs of a speedy economic recovery and upbeat forecasts for energy demand supported by vaccinations against COVID-19 although waves of infections in India and Brazil curbed gains.
Brent crude climbed 83 cents, or 1.2 per cent to $69.38 a barrel, earlier in the day, with West Texas Intermediate U.S. crude rising 86 cents, or 1.3 per cent, to $66.14.
As at yesterday evening, prices of Brent had hit $69.86, a few cents shy of the much expected $70 while WTI was at $66.56.
It coincided with a monthly report published by the International Energy Agency (IEA), which noted that demand for oil will exceed the output of top producers.
“The anticipated supply growth through the rest of this year comes nowhere close to matching our forecast for significantly stronger demand beyond the second quarter,” the IEA said.
Oil prices were also supported by the outlook from the Organisation of the Petroleum Exporting Countries (OPEC), which on Tuesday stuck to a forecast for a strong recovery in world oil demand in 2021, with growth in China and the United States, outweighing the impact of the coronavirus crisis in India.
Prices were further impacted by data from the American Petroleum Institute (API) industry group showing that U.S. crude oil stocks fell by 2.5 million barrels in the week to May 7.
The fall came before the Colonial Pipeline was hit by a cyberattack last Friday, forcing the shutdown of a pipeline that transports more than 2.5 million barrels of fuel per day.