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NNPC Jettisons Long-term Crude Lifting Contracts

NNPC Jettisons Long-term Crude Lifting ContractsReported plans by Nigeria to move away from holding annual contracts for the lifting and sale of its crude oil grades, to longer term contracts have been sidestepped by the Nigerian National Petroleum Corporation (NNPC).
The NNPC disclosed this last week in Abuja when it opened the bid documents submitted by 254 firms looking to be considered in Nigeria’s crude oil lifting contract for the periods 2018 to 2019.

Nigeria, in January 2017 disclosed through the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu that it would replace the annual crude oil lifting contract with long-term contracts from which selected companies and traders would lift her crude oil for periods longer than one year.

Kachikwu in a podcast posted on his Facebook page and titled: “Nigeria Petroleum Sector 2017 Outlook,” stated that he would move Nigeria away from the short-term annual lifting contract to longer-term practices, adding that his preference for a long-term crude oil lifting contract against the current short-term regime was based on the need to create some level of contract certainty in marketing Nigeria’s crude oil grades.

He said then: “We are going to firm up long-term markets, we must stop the year-to-year crude terms contracts and gas sales. We have to go to the long-term markets that is what everybody in the world is doing.
“Nobody is letting their oil to circulate and be priced inappropriately in the international market. You have got to find who your term partners are, what do they want, how do you sign five, six, seven, 10 years contract and gravitate away from the year-to-year contract that you see in this industry.”

However, in his response to a question on why the corporation opted to continue with the short-term lifting contract after Kachikwu said it would move away from it, the Group Managing Director of the NNPC, Dr. Maikanti Baru, said its decision to continue with the short-term contract was informed by market fundamentals.

He said the corporation considers that new opportunities would continue to emerge at intervals which it would not want to shut out, adding that it would conduct another bid round for oil liftings in 2019 and 2020.

Baru, said: “I think the nature of commodity trading is that in some cases you even do it at shorter periods because of the share volume that is concerned. We continuously do refresh the bidders’ position or lifters position on yearly basis because we think that there are opportunities for other players that could come in and we don’t want to shut them down. For now we will do another term contract for 2019/2020.

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