The Nigerian National Petroleum Corporation (NNPC) on Thursday last week, received 101 bids from oil traders seeking offshore processing agreements (OPAs) with the state-run oil firm under its crude-for-petroleum products’ exchange programme.
Results from the public bid opening, which was coordinated by NNPC’s General Manager, Supply Chain Management, Sophia Mbakwe, in Abuja, showed that some of the bidders included Emirates National Oil Company Singapore Private Ltd, Sahara Energy Limited, Oando Plc, Rain Oil Ltd, Petraco Ltd, Eni Trading and Shipping, and Ene Gas.
Others were Shell Western Supply and Trading Ltd, North West Petroleum and Gas Ltd, Unipec Benjing, Totsa Total Oil Trading SA, Forte Oil Plc, Slok Nigeria Ltd and Oma Trading International Ltd.
NNPC cancelled the last set of OPAs awarded to Sahara Energy, Aiteo Oil and Gas and Duke Oil in September, stating that it was going to invite companies to bid for new crude-for-petroleum product contracts under revised terms.
Speaking on the bid process, the Managing Director of the Pipeline and Products Marketing Company (PPMC), the product marketing subsidiary of NNPC, Mrs. Esther Nnamdi Ogbue, said the winning bids would have to, among other stringent criteria to be adopted for their selection, show evidence of a minimum turnover of $1 billion as well as affiliations with refineries to process crude oil that would be allocated to them within the OPA framework.
Ogbue however explained that within the new framework, which is expected to kick off from January 2016 and perhaps last for one year when the country’s refineries are expected to increase production, about 210,000 barrels of crude oil a day (bpd) from NNPC’s domestic crude oil allocation of 445,000bpd would be committed for the OPAs.
She noted that the corporation hopes to progressively reduce the amount of oil commited to the OPAs in the next 12 months.
“Depending on the price, this will determine how many companies we will invite to participate in this arrangement.
“Firstly, we are looking at people who have refineries, affiliations with refineries or access to refineries. So you have to show us a proven agreement that has been signed so that we can sort of eliminate the third parties in these arrangements.
“We are also looking at those who have the muscle to support this arrangement, so we placed the minimum turnover of these companies to at least $1 billion.
“We also want our people and Nigerians to be trained, so you must show us concrete plans to train Nigerians who work with these companies and transfer knowledge to Nigerians,” Ogbue said.
She further said that inasmuch as the corporation hopes to encourage local participation in the OPAs, it was not going to bend the rules of engagement for any participant.
According to her, “As much as we support Nigerians, NNPC and PPMC are not Father Christmas; your price must be right. This process entails taking our crude to refineries, processing it at the refineries while we pay a processing fee.
“Nigerians are encouraged to participate, but they must give us the right price. PPMC is commercial organisation and I am looking at my bottom line, so Nigerians are impacted.
“If you don’t give the right price, then it would affect you and me when we get to the petrol station, when we want to buy petrol, kerosene or LPG.
“We have 101 bids while 445,000 barrels per day is the volume involved. Currently, we have 210,000 barrels per day going to the OPAs, so the intention is that when our refineries work better, we hope that there will be a drastic reduction from the 210,000bpd being allocated for the OPA arrangement.
“The intention is to progressively reduce this in the next 12 months and with all the plans going on with the rehabilitation of the refineries, we are hoping that this is the last time we will have such an arrangement.”
Talking about the process, she explained that NNPC had decided to be transparent in its selection of the traders to show that nothing has been done underhand.
“It’s an open bid process. Also, we will have a multi-disciplinary committee that will actually access these bids and the outlines have been stated.
“After that those results will also be publicly announced, so everything is being thrown up to the open so that there will no doubt about the process.
“We are hoping that this arrangement will be in place in January and will last for 12 months.
“Going forward, we are going to see a painstaking contractual process in all PPMC contracts because you want the contractor who is bidding to see that he is being considered fairly.
“So we will do what it takes to be transparent. Nigeria has to benefit from the fact that it is an oil producing country. The number of winners will be predetermined from what we see in the bids,” she said.
Speaking earlier, the Group Managing Director (GMD) of NNPC, Dr. Ibe Kachikwu, emphasised that the process had to be opened for public scrutiny to ensure that no underhand dealings were involved in selecting the preferred bidders.
He equally stated that the presence of the Nigeria Extractive Industries Transparency Initiative (NEITI) and Bureau of Public Procurement (BPP) at the bid opening was indicative of the kind of transparency the corporation hopes to inject in its businesses going forward.
“This is a very important occasion for us, these are those little steps that you take one at a time and ultimately it will lead to where you are going.
“I thought that the opening of the tenders should be very transparent, very public. So there is no impression that something sinister goes on.
“NNPC’s doors are being opened very wide to the sector and the whole idea is to get results that are beneficial for the country, cut costs for the corporation and at the same time send the right kind of message about where we are headed,” he said.
Kachikwu added: “The OPAs are very important because they would make refined products available that we sell at our stations in the absence of our refineries working at the levels that they should.
“One of the reasons I have asked the GED for refineries to be here is so that he has the responsibility of taking me out from future OPAs. I do hope that this is probably the last OPA bid that we open; that our refineries will get to a point where they can produce our products and satisfy the needs of this country.
“That is where we should be headed and that is certainly the target that we have over the next 18 months. But whilst this is on and while we are still suffering from the malaise that we have, I ask you all to have us in your thoughts as we embark on this journey.”
Kachikwu further spoke on the need to ensure that strong candidates emerge from the bids. “As part of this exercise, we must pick companies that are known to everybody, not shrouded in mystery, where the terms are very transparent and comparative to the terms found anywhere else in the world where OPAs are been done, and futuristic growth patterns especially for companies that do business in Nigeria.
“I hope that at the end of the day, we will see companies which have solid investments in this country, because it is not just a trading issue, not just a one off type of transaction – we have got to work together in the long term for progress.
“I want known companies with good investments in Nigeria, that are globally recognised, with access to refineries and certainly meet all the bid terms,” he said.