02 November 2018, Sweetcrude, Lagos — The Nigerian National Oil Corporation, NNPC, said on Thursday that it had signed a crude-for-product deal with BP for the next six months to help meet Nigeria”s gasoline needs over the Christmas and New Year holidays and ahead of the country’s general election in February next year.
Nigeria is Africa’s biggest oil producer and a member of the Organization of the Petroleum Exporting Countries, OPEC, but the country is almost wholly reliant on fuel imports as its refineries barely function after years of neglect and infrastructure sabotage.
Periodic fuel shortages are common with cars lining up at the pump sometimes for days, especially during the Christmas period.
Incumbent President Muhammadu Buhari, whose popularity is already sagging, cannot afford to be seen as unable to meet the needs of Nigeria’s 190-million population.
Reuters reports that it was not immediately clear what volume would be allocated to BP. NNPC already has 10 similar deals for a total of just over 300,000 barrels per day of crude out its close to 1.9 million bpd of production as of October.
NNPC initially announced on Twitter late on Wednesday without providing details. BP declined to comment.
In its statement, NNPC said the arrangement with BP would account for 20 percent of the west African country’s total gasoline needs.
NNPC imports about 70 percent of Nigeria’s fuel needs mainly gasoline, via swap contracts known as Direct Sale Direct Purchase (DSDP).
Foreign firms must pair up with a local company to deliver the products. NNPC said that BP will be partnered with Nigerian firm AYM Shafa.
BP was not originally among the companies with whom NNPC signed DSDPs.
“BP’s partnership with AYM Shafa…makes it a perfect fit for our plans to ensure that there is adequate supply of products throughout the coming Yuletide and even beyond the election period,” NNPC managing director Maikanti Baru said, adding that AYM Shafa has 150 retail outlets and depots.
The existing contract holders that include trading houses Vitol, Trafigura, Mercuria and French oil major Total started in mid-2017.
NNPC extended the existing DSDP contracts to June 2019 but several trading sources in the consortiums have requested new price terms, sources with direct knowledge said.
Higher oil prices this year have helped boost Nigeria’s foreign exchange reserves, but the weakness in the country’s currency against the U.S. dollar has forced the central bank to spend billions to keep the naira stable and prevent an unwelcome spike in its import bill.
Nigeria has been using swaps for about 10 years. NNPC launched the DSDP model in 2016 and under it, NNPC sells crude oil to refiners or trading houses, who in return, supply mainly gasoline but also other petroleum products such as diesel.
Trader/Refin Local partner(s) Volume (minimum ery expected) Trafigura AA Rano 33,000 bpd Petrocam Rainoil/Falcon Crest 33,000 bpd Mocoh Heyden 33,000 bpd Cepsa Oando 33,000 bpd Sahara SIR 33,000 bpd Mercuria Matrix/Rahmaniya 33,000 bpd Socar Hyde 33,000 bpd Litasco MRS 33,000 bpd Vitol Varo 33,000 bpd Total Total 33,000 bpd 10 Groupings 330,000 bpd