A Review of the Nigerian Energy Industry

NNPC oil swaps: Taleveras says it was not asked to refund $115m

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08 June 2015, Lagos – Oil and gas trading firm, Taleveras Petroleum Trading BV, has provided clarification on its involvement in the crude for petroleum products exchange agreement, better known as crude oil swaps, with the Nigerian National Petroleum Corporation (NNPC).

In a statement provided by the company founded by Mr. Igho Sanomi, Taleveras stated that in line with the swap agreement, its reconciliation exercise was finalised on May 5 to 8, 2015 with NNPC, while deliveries of petrol to wind down in June 2015 are presently progressing according to plan as contained in the terms and conditions of the agreement.

Making references to THISDAY’s exclusive report yesterday on the probe being undertaken by the Department of State Security (DSS) into the swaps and offshore processing agreements (OPAs) entered into between NNPC and Nigerian oil traders, the company’s statement signed by its spokesman Mr. Ovie Akpovwa, said: “At no time has Taleveras been asked or has it refunded $115 million to any authority under any recovery process,” describing that aspect of the story as inaccurate.

Akpovwa stated that the company, in February 2011, entered into a management and operations agreement with Duke Oil Incorporated, a subsidiary of NNPC, to operate and manage its crude for product exchange agreement with NNPC/PPMC from February 2011 to December 2014.

This management and operations agreement, Taleveras said, has expired and was not renewed by either party, noting it that has no direct contract with NNPC/PPMC as it relates to the crude oil swaps.

“The crude for product exchange process is a very straight forward barter arrangement, which simply means you load the crude and you deliver refined petroleum products mainly gasoline based on crude lifted.

“The crude for product exchange process is backed by a clearly defined legal commercial agreement; this agreement is guided by clear dispute resolution and legal jurisdiction clauses, should any dispute arise.

“The crude for product exchange agreement does not involve the supply of by products, as there is no refining of the crude oil involved, it is a straight barter agreement and this is the difference with an offshore processing agreement (OPA).

The crude for product exchange contract is value for value-driven and a reconciliation exercise is held regularly to determine over deliveries and under deliveries as it relates to each party’s position.

“It is a standard practice that towards the end of the agreement, an indication of a final position is determined during reconciliation and this automatically triggers the winding down process of the agreement and Taleveras is currently at this stage.”

It noted that the swap agreement entails that a Standby Letter of Credit (SBLC) is issued before any vessel is cleared to load the crude oil, “which means that at all time there is an underlying security, and if products are not delivered, this SBLC can be cashed”.

Taleveras added that upon the non-renewal or extension of the agreement in the fourth quarter of 2014, Taleveras made a case in writing for its final reconciliation to take place urgently.

“This request was borne out of the simple fact that we had no forward contract to look forward to and/or leverage on, in a situation where Taleveras was being owed.

“In any case, this is in line with best practices in a winding down process of such an agreement, a reconciliation is only imperative to have an indication of a final position to know exactly what to deliver to close such an agreement.

“Going contrary to our stance of having a reconciliation first and due to the need to supply gasoline (petrol) for the nation to reduce any anticipated scarcity, Taleveras went ahead to deliver more gasoline cargoes to assist the situation in the country, bringing over 102 million litres of gasoline,” the company said.

On May 5 to 8, 2015, Talevaras pointed out that the reconciliation exercise finally occurred and it reconciled its accounts and now has in its possession a signed reconciliation statement to this effect.

“Consequent to this reconciliation, Taleveras will be delivering three to four cargoes of gasoline in June 2015 to wind down completely. In this regard, and in ensuring a steady supply of gasoline to assist the present situation, Taleveras has nominated the following cargoes as part of its winding down activity: one cargo arrived in Lagos on June 3, 2015, another arrives Lagos on June 10, 2015.

“We have requested for further delivery dates of June 20 to 15 and June 20 to 25 to meet our management directive to wind down this agreement completely in this month of June 2015,” the company said.

It noted that the delivering the petrol on behalf of NNPC, all demurrage cost are reimbursable, as this is the cost of waiting time a vessel takes to deliver her cargo to PPMC, vessels, jetty/depot or assigned facilities, adding that NNPC/PPMC, PPPRA, NPA, the Customs, Navy, NIMASA and inspectors are among all agencies that meet vessels on arrival to commence formalities and record taking.

“Under the swaps, delivering companies under this agreement have no recourse to subsidy claims or receive any subsidy on products delivered.

As such, Taleveras has never received any amounts under the subsidy Scheme,” it added.

Akpovwa noted that although Taleveras’ agreement was not renewed or extended by the past administration, which was well within their rights and authority to do so, he welcomed the idea of giving Nigerian managed companies a chance to demonstrate their competence in managing such complex transactions.

“This has certainly earned Nigerian companies respect in the international circles of oil and gas trading firms and financial institutions,” the company stated.

It further highlighted that such complex transactions were not in any way new to the company and associated companies, as Taleveras has been actively trading in the African region and international markets well before 2001, adding that it has a strong trading presence with personnel located across West Africa and internationally, and with a combined experience of over 100 years in the oil and gas industry.

“Senior management personnel of Taleveras are made up of former employees drawn from global investment banks, major refiners and several large international trading houses.

“The resultant effect of Taleveras performance, based on its involvement in the product exchange agreement, could be felt as regular fuel supply was evidently experienced during the period of the company’s participation,” Akpovwa added.

Speaking further, Akpovwa said Taleveras shares in the present government’s policy of developing a well sustained and fair oil and gas industry, and has stayed guided by this principles in all its dealings.

It welcomed all inquiries as they relate to the swaps on behalf of NNPC/PPMC, adding that the management of the company had earlier directed all its key officers to return to Nigeria by May 29, in order to engage with all relevant authorities.

In order to clear its name and position itself, Taleveras said it has offered its full cooperation to all agencies and the media to create a better awareness and clear all misinformation.

On Shell’s divestment from Oil Mining Lease (OML) 29 and the Nembe Creek Trunk Line, Akpovwa recalled that the company’s subsidiary, Taleveras Energy, was part of the bidding consortium for the oil block and pipeline.

“This consortium was initially made up of about six companies, which initially included a reputable international upstream firm based in Norway.

“Taleveras Energy had evaluated the process of the bid and was satisfied that it was made competitive and was monitored, regulated and supervised by a top European international bank.

“Taleveras Energy made an investment decision on a minority scale, this was backed up, as widely reported in a press statement by Aiteo Eastern E & P Limited, stating Taleveras Energy’s five per cent minority equity in this company.

“As such, and in accordance with Aiteo’s statement, Taleveras presently has no board presence or management presence in this company and the OML 29 project.”
*Alike Ejiofor – Thisday

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  • martin ugboma

    Will be interesting to check demurrage costs as a percentage of products delivered. Legal agreements without sincerity of purpose will always be abused.