Nigeria Tightens Conditions for Oil Lifting Contracts

Nigeria spends billions each year on oil transports
Nigeria spends billions each year on oil transports

The Nigerian National Petroleum Corporation (NNPC) has modified the conditions that will be met by companies wishing to bid for the lifting of Nigeria’s crude.

The corporation also plans to prune the list of winners to ensure that only reputable local and international companies are selected.

The trimming of the list was part of the strategies that would be adopted by the corporation to ensure that only “fit and proper” firms would benefit from the crude oil term contract.

The corporation has often been accused of allowing political considerations to influence its business decisions.

Last year, the NNPC included commitment to invest in Nigeria’s power sector, domestic gas supply, construction of oil refineries in Nigeria, as well as undertaking development projects in the Niger Delta region as some of the criteria for the award of the crude contracts.

Previously, the corporation also listed the criteria to include: evidence of the applicants’ readiness to comply with Nigerian government’s local content policy in the oil and gas industry; investment in the upstream sector to increase national oil reserves and production capacity; investment in the downstream projects in refining, petrochemicals, distribution and storage of petroleum products, gas utilisation projects; independent power plant projects (IPP); and railway construction.

The NNPC also in 2011 said that interested companies must post an annual turnover of $500 million and net worth of not less than $100 million.

But in its just-released tender for the 2012 contract, the corporation excluded investments in Nigeria as part of the criteria but instead increased the annual turnover and net worth to $600 million and $300 million respectively.

Also, companies were required to pay a $5 million deposit before buying the first oil cargo.

The corporation also said it planned to maintain regional balance in the choice of companies that would lift its crude oil beginning from June 1, 2012 to May 31, 2013.

Such companies, it added, must be bona fide end users that own refineries and retail outlets.

The bidding companies were also required to show details of their facilities, markets and volume of crude oil processed over the last three years, which must be attached to their applications.

On the other hand, indigenous Nigerian companies engaged in oil and gas business that wish to apply must, the corporation said, must attach evidence of registration.

Other companies qualified to apply, according to the notice, include those that have been involved in oil and gas business for not less than 10 years and such companies must show evidence of 10 years operation.

The widespread criticisms that greeted the 2008 crude lifting contract had prompted the Federal Government to drop 18 of the 42 companies that got the contracts.

Of the 28 companies granted approval to export between 30 to 60 barrels per day (bpd) of crude oil in 2008, only seven were said to have investments in Nigeria.

The contention of stakeholders was that most of the companies that won the contracts were “brief case” concerns with no known investments in Nigeria.

Most of the companies, which only exist in the books of the Corporate Affairs Commission (CAC), were foreign firms.

Some indigenous stakeholders who were not satisfied with the manner in which the contracts were awarded over the years had also alleged that some of the regular beneficiaries were companies owned by retired military chiefs, former NNPC chiefs, politicians and their fronts.

It was also gathered that only a few Nigerian companies benefited last year. The three biggest beneficiaries that clinched contracts of 60,000 bpd each were oil trading giants Vitol, Trafigura and Glencore.