A Review of the Nigerian Energy Industry

NNPC to invite firms to ender for crude delivery contract

NNPC Towers
*NNPC Towers

15 September 2015, Abuja – A few weeks after the Nigerian National Petroleum Corporation (NNPC) cancelled the crude oil delivery contract for its refineries with Ocean Marine Transport (OMT) citing exorbitant costs and inappropriate process of engagement, it intends to retender the contract which will now be awarded on a stop-and-go basis.

As a stopgap measure, NNPC engaged its subsidiary – NIDAS Marine Limited – to provide crude delivery service to its refineries on a negotiated industry standard rate, pending the establishment of a substantive contract.

A top source in the state-run oil firm informed THISDAY yesterday that OMT and other firms, including oil multinationals, would be invited to tender for the contract, but whichever firm is appointed to deliver crude oil to the Port Harcourt and Warri refineries would do so on a stop-and-go basis, meaning the company shall only be called in to deliver crude to the plants in the event the integrity of NNPC’s crude oil pipelines have been compromised.

He explained that the approval to retender the process was given by President Muhammadu Buhari who was concerned about the exorbitant nature of the contract entered into with OMT in the past.

However, he added that the primary focus of the corporation was to effect repairs to the pipelines for the delivery of crude oil to the refineries, as this is a more cost-effective way of getting crude to the plants than the use of marine vessels.

In his regard, the NNPC source said the corporation was focusing on the repair and rehabilitation of the crude oil pipeline network, and considering the lease of 20 patrol boats to the Nigerian Navy to provide security for the pipelines, offshore loading units and other oil and gas infrastructure in the Niger Delta.

“We have looked at the issue very carefully and come to the conclusion that it will be better for us to outsource the hire of 20 patrol boats to the navy once the crude pipelines are fixed, because if you look at the opportunity cost of losing 250,000 barrels of crude oil daily to oil thieves, it would be better to lease patrol boats to secure the pipelines and other infrastructure.

“This notwithstanding, with the president’s approval, we intend to invite companies to tender for the crude delivery contract to the refineries so that they are available to deliver crude oil on a stop-and-go basis, that is, on a temporary basis, in the event the pipelines are compromised,” the source said.

He explained that the rational for the cancellation of the multimillion dollar contract with OMT founded by the Chairman of Skye Bank, Mr. Tunde Ayeni, and Edo State business mogul, Capt. Hosa Okunbor, among other investors, was informed by the fact that the company was being paid even when crude oil was not being delivered to the refineries.

“We had to cancel the contract because it was heavily loaded, but we will retender it and invite OMT and other companies to bid for it and select the firm that will give us the best deal to deliver crude oil with their vessels when necessary,” he said.

By cancelling the contract and appointing a new firm under new terms, the NNPC source said the corporation would be saving as much as 40 per cent which could be utilised for the lease of patrol boats for the navy.

On the petroleum products pipelines and depots network, he added that like the crude oil pipeline network, NNPC had come out with a 90-day strategy to reinforce security for the network.

“We are involving the Nigerian Army Corps of Engineers, the Civil Defence Corps and host communities to secure our fuel product pipelines and depot network and will reinforce this with technology based measures using drones and tracker systems.

“Under the 90-day strategy, we intend to get the refineries operating at improved capacity and the pipelines and depots moving products nationwide as a cheaper and more efficient means of distributing petroleum products.

“Already, for the first time in decades, the Warri-Enugu line has been fixed, enabling us to move products for the South-east to the Enugu depot from the Warri refinery. We are now focusing on the Moisimi-Ilorin line, among others,” he said.

He acknowledged, however, that NNPC would still have to contend with internal sabotage, adding that the Group Managing Director of the corporation, Dr. Ibe Kachikwu, had obtained the permission of the president to rotate NNPC personnel running its pipeline and depot network to check sabotage.

He said ultimately NNPC would focus on the unbundling of its subsidiary, the Petroleum Products Marketing Company (PPMC), with the creation of a pipeline company that would focus primarily on the maintenance of thousands of kilometres of its pipelines, a storage

company that would maintain the 23 depots, and a products marketing company that would market and sell petroleum products. “In the medium to long-term, by the time we unbundle, we will evolve a strategy to roll out a new pipeline network under a private-public partnership or joint venture arrangement.

“The reason for this is that the existing network is over two-decades old. As such, we need to replace the facilities with larger pipelines that are better reinforced and buried deeply, so that we can move more products nationwide and reduce the number of fuel tankers on our roads,” he said.

In this article

Join the Conversation