India, one of the world’s fastest growing economies, has pushed for increase in crude imports from Nigeria to 77 million barrels in 2017, with a bargain of upfront payment amounting to about $3.85 billion.
A meeting between three Indian state-run oil refiners and Group Executive Director, Nigerian National Petroleum Corporation (NNPC) Refineries, Anibor O. Kragha, in New Delhi, yesterday kick started the ongoing negotiation.
One ton of crude is equivalent to 7 barrels while the 11 million tons, which translates to 77 million barrels, is worth $3.85 billion based on an average of $50 per barrel.
In an interview with S&P Global Platts in New Delhi, Kragha stated: “Three Indian companies mentioned that they are looking for a combined total of 11 million metric tonne (mt) in 2017 from 9 million mt this year.
“Now, what they will get is a balance between term contracts and spot sales contracts.” He said there was an ongoing negotiation as he was not sure if the deal would materialise. “We just came out of a meeting with key Indian oil companies and they were pushing to get incremental allocations for the term contracts. We explained to them that there needs to be a balance.
“Once Nigerian output recovers, it will increasingly look towards India as the major buyer of its crude. Indian demand is very positive for us. A vibrant Indian economy is good for us,” he said.
The two countries have been working on a memorandum of understanding in the past month to enable the participation of Indian companies in Nigeria’s upstream and downstream oil and gas sectors.
“The deal being negotiated by Nigeria will also have the Indian government make an upfront payment for the purchase of Nigeria’s crude on a long-term basis as well as Indian public sector companies investing in Nigerian refineries,” S&P Global Platts said. Indian state-owned refiners tend to buy most of their crude on term contracts while their remaining requirements are sought via tenders.
India is a significant buyer of Nigerian crude, which is largely light and sweet, rich in gasoline and diesel and low in sulphur, and meets the needs of Indian refiners. State-owned refiners like Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd, (HPCL) are major regular buyers of Nigerian crude like Qua Iboe, Bonny Light, Escravos, EA Blend, Erha, Usan and Agbami.
According to a source from an Indian refiner, “Nigerian crude is a must for most of our refineries, especially the older ones, which have been designed to run light sweet crude.
“Despite all the militancy issues, we still buy Nigerian crude, as our refineries need it. We will continue to buy Nigerian crude, but we want them to supply us with more,” he said.
The Indian refiners indicated interest to increase total crude oil consumption volume next year with additional 2 million mt of crude oil import from Nigeria in 2017. The Nigerian crude oil term contracts involve the export of around 1.17 million barrels per day (b/d) of Nigerian crude; out of the 2.2 million b/d the country can theoretically produce.
They are then sold by contract holders to end users, refiners and other buyers.
The federal government, it would be recalled, said in October that it was set to sign a cash-raising oil deal with India for $15 billion by the end of this year, just as Nigeria’s oil production is also expected to rise by 22 per cent to 2.2 million barrels per day in the same period when oil companies lift the force majeure on fields that were shut down as a result of militancy in the Niger Delta.
