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NNPC opens tender for 2015/ 2016 crude oil term contract

President Muhamadu Buhari has approved a tendering process for the 2015/2016 Crude Oil Term Contract and the evacuation of Nigeria’s crude oil equity from the various crude and condensate production arrangements.

The Nigeria National Petroleum Corporation (NNPC), which announced the presidential approval, said it will begin with the advertisement of the Crude Oil Term contract in both National and International print media for one month.

The new arrangement has been “carefully structured to weed out briefcase companies and rent seekers,” a statement by the Corporation last night said.

The NNPC confirmed the cancellation of crude oil swap contracts as well as Offshore Processing Agreement Contracts (OPA), which the corporation entered with traders under the previous administration of President Goodluck Jonathan.

The corporation announced new measures aimed at cost reduction and strengthening of operational efficiency across its value chain.

It said after proper evaluation and in line with the terms of contract for the delivery of crude oil to the refineries in Warri, Port Harcourt and Kaduna, it cancelled the current contract due to exorbitant cost and inappropriate process of engagement.

The Corporation noted that as a stop-gap measure, NIDAS Marine Limited, a subsidiary of the NNPC has been engaged to provide crude delivery service on negotiated industry standard rate pending the establishment of substantive contract.

The statement signed by Group General Manager, Group Public Affairs Division, Mr. Ohi Alegbe added: “We have also commenced a rigorous and transparent process of securing capable and competitive contractors for the delivery of crude oil by marine vessels to Port Harcourt and Warri/Kaduna Refineries pending the restoration of the Crude Pipeline infrastructure.”

The NNPC said it resorted to the delivery of crude oil to the refineries by marine vessels following incessant attacks on the Bonny-Port Harcourt refinery pipeline and the Escravos crude pipelines by vandals and oil thieves resulting in the complete unavailability of the pipelines in 2013.

The corporation also said the OPA contracts it entered in January 2015 with three companies, namely- Duke Oil Company Inc., Aiteo Energy Resources Limited and Sahara Energy Resources (Nig) Ltd, has been cancelled because it was “skewed in favour of the companies.”

Under the agreement NNPC allocates a total of 210, 000 barrels of crude oil per day for refining at offshore locations in exchange for petroleum products at pre-agreed yield pattern.

“However after detailed appraisal of the operation and its terms of agreement, the NNPC is convinced that the current OPA is skewed in favour of the company’s such that the value of product delivered is significantly lower than the equivalent crude oil allocated for the programme,’’ the Corporation said.

The NNPC also observed that the structure of the agreement does not guarantee unimpeded supply of petroleum products as delivery terms were not optimal.

To address these lapses, the NNPC said that it had commenced the process of establishing alternative OPA based on optimum yield pattern with tender processing fees.

“After due appraisal of performance trajectory, we have invited Messrs. Oando, Sahara Energy, Calson, MRS, Duke Oil, BP/Nigermed and Total Trading to bid for the new Offshore Processing Agreement while we have engaged AITEO, Sahara Energy and Duke Oil to exit the current OPA,’’ the NNPC stated.

On the status of the Crude for product exchange agreement (SWAP) reportedly entered into by the NNPC and some oil traders, the corporation informed that the last SWAP arrangement lapsed in December, 2014 and was never renewed.

August 27, 2015
NNPC nullifies supply of crude oil to refinery contract

The Nigerian National Petroleum Corporation (NNPC) Wednesday announced new measures aimed at cost reduction and strengthening of operational efficiency across its value chain.

The NNPC in a release stated that after proper evaluation and in line with the terms of contract for the delivery of crude oil to the nation’s refineries in Warri, Port Harcourt and Kaduna, the Corporation has cancelled the current contract due to exorbitant cost and inappropriate process of engagement.

The Corporation noted that as a stop-gap measure, NIDAS Marine Limited, a subsidiary of the NNPC has been engaged to provide crude delivery service on negotiated industry standard rate pending the establishment of substantive contract.

A statement of the Group General Manager, Group Public Affairs Division, Mr. Ohi Alegbe that made this disclosure quoted the corporation as saying “We have also commenced a rigorous and transparent process of securing capable and competitive contractors for the delivery of crude oil by marine vessels to Port Harcourt and Warri/Kaduna Refineries pending the restoration of the Crude Pipeline infrastructure.”

The NNPC explained that it resorted to the delivery of crude oil to the refineries by marine vessels following incessant attacks on the Bonny-Port Harcourt refinery pipeline and the Escravos crude pipelines by vandals and oil thieves resulting in the complete unavailability of the pipelines in 2013.

The Corporation also announced the termination of the Offshore Processing Agreements, OPA, entered into in January, 2015 with three companies, namely- Duke Oil Company Inc., Aiteo Energy Resources Limited and Sahara Energy Resources (Nig) Ltd. Under the agreement NNPC allocates a total of 210, 000 barrels of crude oil per day for refining at offshore locations in exchange for petroleum products at pre-agreed yield pattern.

“However after detailed appraisal of the operation and its terms of agreement, the NNPC is convinced that the current OPA is skewed in favour of the company’s such that the value of product delivered is significantly lower than the equivalent crude oil allocated for the programme,’’ the Corporation said.

The NNPC also observed that the structure of the agreement does not guarantee unimpeded supply of petroleum products as delivery terms were not optimal.

To address these lapses, the NNPC informed that it has commenced the process of establishing alternative OPA based on optimum yield pattern with tender processing fees.

“After due appraisal of performance trajectory, we have invited Messrs. Oando, Sahara Energy, Calson, MRS, Duke Oil, BP/Nigermed and Total Trading to bid for the new Offshore Processing Agreement while we have engaged AITEO, Sahara Energy and Duke Oil to exit the current OPA,’’ the NNPC stated.

On the status of the Crude for product exchange agreement (SWAP) reportedly entered into by the NNPC and some oil traders, the Corporation informed that the last SWAP arrangement lapsed in December, 2014 and was never renewed.

The NNPC also informed that it has obtained the permission of President Muhammadu Buhari to kick-start the tendering process for the 2015/2016 Crude Oil Term Contract for the evacuation of Nigeria’s crude oil equity from the various crude and condensate production arrangements.

The Corporation noted that the process which would commence with the advertisement of the Crude Oil Term contract in both National and International print media for a period of one month has been carefully structured to weed out “briefcase companies’’ and rent seekers.

August 26, 2015
NNPC seeks one more year for PIB’s review

The Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Dr. Ibe Kachikwu has said a lot of engagement is required to address all the issues in the Petroleum Industry Bill (PIB), following the changes in the oil and gas environment.

According to him, the state-run oil firm would need at least one year to review the legislation before getting it back on track.

He said: “PIB is a serious affair, it is an essential piece of legislation but as we all know, a lot of engagement is required to address all the issues because the oil and gas environment has changed. “There are issues of cost, with oil going down to $40 per barrel, the PIB cannot be the same.”

The bill has been pending in the National Assembly over the last seven years.

Its Group General Manager, Group Public Affairs Division, Mr. Ohi Alegbe, in a statement explained the GMD spoke while chairing a special session on the proposed law at the ongoing 55th Annual General Conference of the Nigerian Bar Association in Abuja.

The session had Legal and regulatory framework of the petroleum industry in Nigeria: Review of existing Laws and the Petroleum Industry Bill (PIB) as its theme.

He described the bill as an essential legislation which must be approached with all seriousness and thoroughness.

On what the Federal Government intends to do with the draft legislation, Dr. Kachikwu said the PIB has come to stay, though it would require some time to perfect the draft.

August 26, 2015
NNPC to review PIB

The Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Ibe Kachikwu, has said a lot is required to address issues in the Petroleum Industry Bill following changes in the oil and gas environment.

Kachikwu said: “PIB is a serious affair, it is an essential piece of legislation but as we all know a lot of engagement is required to address all the issues because the oil and gas environment has changed. There are issues of cost, with oil going down to $40 per barrel, the PIB cannot be the same.”

The bill has been pending in the National Assembly for seven years.

A statement issued by NNPC Group General Manager, Group Public Affairs Division, Mr. Ohi Alegbe, made this disclosure on Tuesday.

According to the statement, Kachikwu spoke while chairing a special session on the proposed law at the ongoing 55th Annual General Conference of the Nigerian Bar Association in Abuja titled: Legal and Regulatory Framework of the Petroleum Industry in Nigeria: Review of existing Laws and the Petroleum Industry Bill (PIB).

He described the bill as an essential legislation which must be approached with all the seriousness and thoroughness it deserves.

Commenting on what the Federal Government intends to do with the draft legislation, Kachikwu said the PIB has come to stay though it would take a bit of time to perfect the draft.

August 25, 2015
NNPC reform: Oil workers disagree with Fed Govt

Nigeria’s oil workers have criticised the on-going reform in the oil and gas industry, saying they would take steps to protect their members’ interest.

The workers, under the aegis of the National Union of Petroleum and Natural Gas Workers and Petroleum and Natural Gas Senior Staff Association of Nigeria (NUPENG/ PENGASSAN) described the reform as a cover-up and vindictive action against their members.

The workers therefore urged President Muhammadu Buhari to call the newly appointed Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC), Dr. Emmanuel Kachikwu, to order by directing him to stop the on-going sack in the Corporation.

Vowing to give equal response to whatever action of government they consider capable of suppressing worker’s interests, the unions suggested that a team should be set up immediately to review Kachikwu’s actions so far in the interest of justice, equity and fairness.

They said within two weeks of the commencement of the reform, Kachikwu has carried out massive restructuring of the management of the corporation. Apart from the sack and re-composition of the board, he has retired 38 top management staff, pruning the top hierarchy of the corporation from 122 to 83, while reducing the operational directorates from eight to four.

In a joint statement by the President of PENGASSAN, Francis Johnson, and his counterpart in NUPENG, Igwe Achese, accused the NNPC management of executing an agenda that did not carry the workers’ unions along.

The statement, which was also signed by their General Secretaries – Bayo Olowoshile and Joseph Ogbebor respectively, also accused Kachikwu of pursuing an agenda contrary to the idea canvassed by President Muhammadu Buhari.

“While we are fully in support of the fight against corruption, the fight itself should not be turned against workers whom government swore to protect,” the oil workers said, noting that the ongoing exercise portends a great danger in the oil sector if workers are meant to bear the brunt of government’s current action where the fight against corruption is now being used as an act of vindictiveness against workers.

The on-going exercise, the oil workers stated, did not show any attempt to fight corruption and block leakages, but was “an act of cover up.”

“We dare the new GMD of NNPC, Dr. Kachikwu to recover the stolen trillions of naira in the sector than retiring and sacking of innocent workers. We are quite sure that the on-going action is not the idea of our dear President,” the workers stated.

As players in all spheres of the industry’s operation, the unions said they have been trying to meet with the President to review the on-going reforms in the NNPC, saying they have so far been kept in the dark by his protocol staff.

Despite being the representatives of organised workers in the industry, the union leaders claimed that all their suggestions on the critical challenges affecting the on-going reforms were not being considered by the authorities.

August 21, 2015
US, IPMAN back NNPC’s reforms

The Independent Petroleum Marketers Association of Nigeria (IPMAN) is backing the ongoing reforms in the Nigeria National Petroleum Corporation (NNPC).

The association has for long been yearning for positive changes, such as the reforms by Dr Emmanuel Ibe Kachikwu, the new NNPC boss.

According to the association’s National Secretary, Danladi Pasali, the downstream oil sector was almost dead before the rescue mission of the present administration.

“No genuine investor was happy with the past situation of the oil sector. Several of our investments were ruined due to corruption at all levels, favoritism and impunity,” it said.

The association continued: “With the appointment of Ibe Kachikwu as the new GMD NNPC by President Muhammadu Buhari, we are convinced that this administration is ready for business. Our members will ensure more investments in the downstream sector.

“We have already begun to see positive signs just two weeks after his appointment. That is enough encouragements for us as investors to put our money back in the downstream sector.

“We will continue to partner with NNPC management for the successful downstream oil sector.

“We have the capacity and investments to flood this country with fuel if given the chance. It is important to note that more than 85 per cent of the petrol outlets belong to our members, therefore, we are closer to people as far as oil distribution is concern than any group or people.”

The association thanked President Muhammadu Buhari for the appointment and assured that it will work with the new management to ensure troubled-free downstream oil sector.

It also urged the new GMD to ignore all sponsored attacks on his style of leadership, saying that the interest of the nation supercedes that of an individual or group.

IPMAN also called on the new GMD as a matter of urgency to encourage private investment in the areas of refining and petrochemicals, as its refinery discussion has already gone far with its partner.

“With his background from the private sector, Dr Kachikwu is expected to give private business more priority, but not to continue relying on government as it was in the past NNPC.

“We welcome the idea of running NNPC as a commercial entity not as cost house of government. Through these types of initiatives, the country will really benefits from its oil wealth,” it said.

In another development, the United States (US) has pledged its readiness to work with the new Management of the Nigerian National Petroleum Corporation, NNPC in achieving the government’s reform agenda in the oil and gas industry.

NNPC Group General Manager, Public Affairs Division, Mr. Ohi Alegbe, who made this known in a statement yesterday in Abuja, after a courtesy call by the US Ambassador to Nigeria, Ambassador James Entwistle on Dr. Kachikwu, quoted the envoy as saying that the US was willing to provide all necessary support for the new management to realise its set goals and objectives.

The US envoy noted that though the NNPC’s GMD’s job was about the most challenging in Nigeria, the US is convinced that he has the skills, training and requisite experience to lead the oil and gas industry through the path of growth and sustainable development.

Commending the US for the pledge to support, Dr. Kachikwu reiterated the determination of the new management to implement the spirit and letter of President Muhammadu Buhari’s reform agenda in the petroleum industry.

August 21, 2015
NNPC set to transform downstream

A strategy to transform the downstream sector of the oil industry is ready. It will make the sector perform optimally, the Group Managing Director, Nigerian National Petroleum Corporation (NNPC), Dr Emmanuel Kachikwu yesterday said.

Kachikwu, who was represented by the Managing Director, National Engineering and Technical Company (NETCO), an arm of NNPC, Mrs Bolanle Ashafa, said the transformation becomes imperative because the Federal Government has committed over N5 trillion on subsidies in the last five years, pointing out that such a scheme is unsustainable in view of the amount involved.

He said subsidy creates distortions in government’s revenue distribution as a result of round tripping and unnecessary carryover of expenditure every year in a way that is difficult to sustain, or control.

Kachikwu said fuel subsidy accounted for 20 per cent of Federal Government’s budget in 2013, adding that why subsidy is not sustainable, government is not in control of the factors that influence retail fuel price, particularly fluctuations of crude oil price at the international market.

Be sides, he stated that through the transformation strategy, the Downstream sector of the oil and gas industry would become transparent, efficient and create fair market for operators who show capacity to play better in the industry.

He said the development would help in rehabilitation of the Brown-field refineries in order to attract International Oil Companies ((IOCs) that have hitherto jettisoned them.

“We at NNPC have resolved to implement a new strategy to transform the Nigerian midstream oil sector into a transparent, efficient and fair market by ensuring the rehabilitation of the brown-field refineries using a new business model.”

Kachikwu, who spoke at the 2015 edition of the National Association of Energy Correspondents (NAEC) conference in Lagos, said Nigeria is the highest importer of premium motor spirit (PMS) in Africa, despite its huge resources.

August 21, 2015
Buhari to NNPC: work with indigenous oil producers

President Muhammadu Buhari yesterday assured indigenous companies operating in Nigeria’s oil and gas sector of the full support and protection of his administration.

He promised during a meeting with members of the Independent Petroleum Producers Association at the Presidential Villa, Abuja to do everything within his powers to address the challenges they currently face.

A statement by the Senior Special Assistant on Media and Publicity to the President Mallam Garba Shehu, said he commended their determination to increase the participation of Nigerians in the country’s oil industry.

He directed the management of the Nigerian National Petroleum Corporation (NNPC) to work closely with the indigenous oil producers to resolve the problems which they enumerated to him.

“We have the manpower for a more effective participation in our oil industry. We will give you all possible encouragement. You certainly won’t be ignored under my leadership,” President Buhari told members of the association which represents about 20 Nigerian companies operating mainly on onshore fields.

President Buhari assured the Nigerian oil producers that the administration will take appropriate actions to maintain and enhance security in their areas of operation, noting that better security will help to lower production costs, which, he said, had become unnecessarily high in the country.

Mr. Austin Avuru, who spoke on behalf of the Nigerian oil producers, told the President of challenges currently being faced by the group such as security and the funding of joint ventures with the NNPC.

He said the indigenous oil producers were already making significant contributions to the development of the economy and could do more with the support of the administration.

Avuru, the chief executive officer of Seplat Petroleum, told reporters after the meeting that given the necessary backing, the Independent Petroleum Producers Group (IPPG) could raise Nigeria’s domestic oil refining capacity to 1.2 million barrels daily by the year 2020.

Stressing that IPPG is made up of indigenous companies responsible for over 200,000 barrels of oil production and over 900 million cubic feets of gas production per day, he said it is a very significant segment of the upstream sector of the oil and gas industry.

He said: “It was one of the points we raised with the President, we think that by 2020 domestic refining capacity should not be less than one million barrel of oil per day in domestic refining.

“We actually put 1.2 million barrels domestic refining capacity per day and that falls on our doorstep as indigenous operators.

Asked how the target would be achieved, he said: “It will be achieved. Some construction is already ongoing by indigenous companies and between some others which are coming in with smaller sized refineries and in partnership with the NNPC. We are confident that by 2020 we will deliver 1.2 million domestic refining capacity.

“We thought it was necessary to engage the President, then fortunately the Vice President, permanent secretary, GMD of NNPC were all there. So it was a very useful discussion.” he added

Speaking further on the necessity of the visit to the President, he said: “Because if you watch the way the oil and gas sector is evolving, increasingly the key segments of the oil and gas industry, the onshore segment and the swamp, oil is now falling into the hands of Nigerian Independent, and which is why in the past five years, we have made so much investment over $9 billion in just acquiring these assets and over $1 billion each year in work programme investment and this is growing.

According to him, the group is seeking ways to become a very critical partner to government in the delivery of natural gas and other products into the domestic economy.

He said that the group called for the meeting with the President as it identified with all his policy direction.

He said: “We realised we are very critical partners that he needed to know about and to engage with very early in the administration of the President. So, we called for the meeting and he obliged us.

“Mr President was very receptive and promised that all the help and support we need to succeed as indigenous producers, we will get it. Specific requests will go to the GMD when we engage him.

“What happened today was all parties, stakeholders and all our partners in government, that is partner to indigenous operators in government were present at this engagement. Of course, we would now follow it up with more specifics when we meet with the GMD of the NNPC.

He said that the indigenous companies do not have to take over from the multinational but will compliment each other.

He said: “The multinational are going into some areas which we are unlikely to go into. Deep offshore, LNG, and whereas the onshore terrain and delivery of gas to domestic market, these have become our frontiers.”

On the about 200 barrel per day production, he said: “That is 10 per cent today. Just in the past five years, up from near zero, and we anticipate that in the next 5years (by 2020) we will account for 30 per cent production of about three million barrels per day, that is very significant especially when in addition to that, we account for half of the total gas delivery to the domestic market. We can get as high as seven PCF per day by 2020.”

August 20, 2015
Peterside hails NNPC’s transparency agenda

All Progressives Congress (APC) Rivers State governorship candidate Dr Dakuku Peterside has praised the new management team of the Nigeria National Petroleum Corporation (NNPC), headed by Dr. Ibe Kachikwu, for promising a monthly publication of the corporation’s account.

Peterside, who was a former chairman, House of Representatives Committee on Petroleum Resources, Downstream, said the corporation’s promise to open its books could not have come at a better time, given revelations of tardiness and impunity at the corporation.

“The new policy on transparency and due process by the NNPC has renewed hopes that Nigeria has all it takes to run a world-class company. This is most encouraging.

“No country or organisation can make any meaningful progress in an atmosphere of chaos and inconsistencies; vices, many believe, had pervaded the NNPC for many years. Transparency in every organisation is key because it helps in measuring growth.

“I am happy that the troubled corporation is living up to public expectation in line with the new change mantra of the APC–led government of President Muhammadu Buhari.

‘’I praise those behind these new initiatives, as the new ideas have can reposition the NNPC, if well implemented.

“But the drivers of this new vision should take a step further towards comprehensive reforms, especially with regard to business models. They should examine critically the corporation’s inherent contradictions essentially in the area of being a player and regulator, all at the same time.

“Steps should also be taken to get NNPC quoted on the stock exchange so that it can run properly as a viable commercial entity.

‘’This is the only way to turn around the fortunes of the NNPC”.

August 20, 2015
Why NNPC’s growth is slow, by don

It is not the dearth of technical know-how, but undue political interference and continued appointment of wrong personnel into the board of the Nigerian National Petroleum Corporation (NNPC) that have been responsible for the slow growth of the Corporation, the President of the Nigerian Chapter of International Association of Energy Economics (IAEE), Prof Wunmi Iledare, has said.

The industry, he said, boasts of enough technical manpower, adding that interference from political elite has made it difficult for people with the right skills to get on Board of NNPC and manage its affairs well in recent times.

He said the development has prevented the Corporation from managing and moving the nation’s oil and gas industry to enviable height and compete favourably with their counterparts globally.

He said Nigeria needs to choose between having a politically constituted NNPC’s Board or a technically constituted NNPC’ Board, if it wants to achieve meaningful progress in the petroleum industry.

He said when the Board of NNPC is technically constituted, the Corporation would be able to carry out its commercial activities of producing and selling oil well for socio- economic growth and further compete with institutions such as Petrobas among others.

According to him, failure to have a well regulated political process in Nigerian means that activities in NNPC and the entire industry would not go on smoothly.

Iledare, an Emeritus Professor at the Centre for Energy Studies, University of Louisiana, United States (US), told the The Nation that some people have misconstrued the restructuring of the NNPC to mean unbundling of the corporation, adding that what the Federal Government was trying to do was to reposition NNPC commercially.

He said: “The Federal Government has unbundled NNPC into different units or institutions several years ago. The development culminated in the emergence of subsidiaries like the Nigerian Petroleum Development Company (NPDC), Nigerian Gas Company (NGC) and others. What the government is doing now is to make NNPC more commercially-oriented and stronger. The issue is line with the NNPC’s Act 1977, which stated that the Corporation should make the production, refining and selling of oil its major objectives.

However, this has not been the case. What NNPC is doing is to preoccupy itself with many responsibilities by regulating the industry, collecting royalties from operators, refining crude oil and selling petroleum products. Why should there be multiplication of duties in NNPC if we want to compete with its counterparts across the world?

Iledare said the government wants NNPC to focus on its commercial duties of producing, refining and selling of oil; the Federal Inland Revenue Service (FIRS) to concentrate on collection of taxes; Assets Management Company of Nigeria (AMCON) focusing on assets evaluation and management, among others.

He said the idea of repositioning NNPC and the industry for greater performance is important, in view of the fact the country relies mainly on earnings from oil for growth.

August 20, 2015