Sanitising NNPC’s oil swap regime

07 September 2015, Lagos – The Nigerian National Petroleum Corporation (NNPC) recently cancelled crude oil swap contracts and Offshore Processing Contracts, which it entered into with traders under the previous administration of President Goodluck Jonathan. The Corporation in a statement also announced new measures aimed at cost reduction and strengthening of operational efficiency across its value chain.

NNPC-Towers-AbujaThe NNPC stated that after proper evaluation and in line with the terms of contract for the delivery of crude oil to the nation’s refineries in Warri, Port Harcourt and Kaduna, it cancelled the contracts due to exorbitant cost and inappropriate process of engagement.

The Corporation noted that as a stop-gap measure, NIDAS Marine Limited, a subsidiary of the NNPC, has been engaged to provide crude delivery services on negotiated industry standard rate pending the establishment of substantive contracts. The NNPC explained that it resorted to the delivery of crude oil to the refineries by marine vessels following incessant attacks on the Bonny-Port Harcourt refinery pipeline and the Escravos crude pipelines by vandals and oil thieves resulting in the complete disabling of the pipelines in 2013.

The corporation also disclosed the Offshore Processing Contracts  it entered into in January 2015 with three companies – Duke Oil Company Inc, Aiteo Energy Resources Limited and Sahara Energy Resources (Nig) Ltd – had to be cancelled because it was “skewed in favour of the companies”, and observed that the structure of the agreement did not guarantee unimpeded supply of petroleum products as delivery terms were not optimal.

The SWAP contracts have in the recent past been trailed by tales of woe and scams of varied magnitudes. The infamous subsidy scams and the under-the-table deals in the arrangement had undermined the probity, honesty and credibility of the contracts. Many saw the deals as frauds that greatly shortchanged the nation. Many of the companies involved were accused of using political influence to get the contracts. Some were alleged not to possess the required infrastructure and expertise to deliver on the contracts.  The cancellation is thus welcomed but the process of re-awarding the contracts this time must not only be transparent, it must be open for competitive bidding. The companies that will be selected must have proven track records of performance and their managements must be fully committed to good corporate governance.

They must deliver service to Nigerians and not to fraudulently feather the nests of individuals. We strongly recommend that the selection process must be professional and devoid of favouritism or tribal sentiments. The invisible hands of the “powers that be” must be removed.

The Buhari administration’s pledge to make the NNPC’s operations transparent is of prime interest to Nigerians and we are watching with keen interest to see it implemented.


  • Vanguard Newspaper editorial
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