NNPC plans new approach to crude oil sales
- Source: chemnet
National Petroleum Corp intends to handle up to 80% of the country's
crude oil lifting contracts via its trading arm in the next few years
as part of efforts to widen its customer reach, a senior official told
S&P Global Platts Wednesday.
Kyari, general manager of state-owned NNPC's crude oil marketing
division, also said in an interview on the sidelines of the APPEC
conference in Singapore it planned to sell more crude on a CIF or
delivered basis to ensure security of supply.
NNPC's trading arm Duke Oil will be given more equity to directly
trade and market the country's crude in the next few years, Kyari said.
is a plan to see how Duke Oil can directly trade the volumes in the
market [up to 80%] and ultimately 100% of our equity in the long term."
current 2017-18 Nigerian crude oil term contracts involve the export
of around 1.306 million b/d of Nigerian crude out of the 2.2 million
b/d the country has the capacity to produce.
gets 90,000 b/d and the other 38 companies on the list have a 30,000
allocates the majority of its crude cargoes to trading companies and
oil refiners that hold term contracts. These cargoes are then sold by
the trading companies to end-users, refiners and other buyers.
the largest buyer of Nigerian oil, has always pushed for the NNPC to
directly market its crude to ensure its largest buyers have secure
supplies, and stop using trading companies and other intermediaries.
hinted NNPC was moving in the same direction as the state-owned
companies of Saudi Aramco and Angola's Sonangol.
markets and sells its crude on spot and term markets after Angola
elected to instead strengthen its trading arm, giving it the ability
to choose clients and end-users.
have said this system would be more transparent and benefit buyers and sellers.
APPROACH TO CUSTOMERS
also said the NNPC was looking to "engage one-on-one as a CIF
supplier to customers". Nigerian crude is mostly sold and priced
on an FOB basis.
enjoying a recovery of late, Nigeria has faced two difficult years,
with oil exports falling almost 40% due to renewed militancy in the
oil-rich Niger Delta.
left regular customers keener to buy crude on a delivered basis to
ensure supply security as attacks on the Forcados and Qua Iboe
terminals had put off some players from buying crude on an FOB basis.
whether it was NNPC's new approach to customers, Kyari said: "We
are growing it. It existed but we have not been patronizing it. Now we
see a great need for that."
also said that as part of its efforts to attract new buyers, NNPC will
make sure grades were "appropriately priced" and it will
also focus on ensuring supply stability, which was a key issue.
FLOWS TO ASIA
will continue to depend on Asia and Europe as its two main traditional
destinations and hopes to increase its share in both regions, Kyari said.
said while 29% of Nigerian exports went to Asia, most went to India
and Indonesia, and not other key demand hubs in China, Japan and South Korea.
Europe and Asia will be our prime buyers in the short term, and there
is growing consumption in Africa also but it is of a smaller
volume," Kyari said.
past decade, Europe has emerged as the biggest demand center as
falling North Sea production along with declining Libyan crude exports
has meant European refineries have had to rely more on West Africa for
light sweet crude.
this year, 17% of Nigerian crude exports have been to the US, Kyari
said, which was a sharp rise from few years ago. Indeed, since the US
started exporting crude in 2015, Nigeria's exports to the US have increased.
of Nigerian crude in the US are refineries on the Atlantic Coast. In
2014, only 3.1% of Nigerian exports went to the US, according to NNPC data.
oil flows from Nigeria to the US were once a major trade route in the
global oil market, but the shale revolution had a profound impact on
the make-up of the US import market, which has, by extension, greatly
altered the direction of crude flows both within Europe and to Asia.
about 2008, the US used to buy more than 1 million b/d of light sweet
Nigerian crude oil, almost 50% of Nigerian exports at the time.
also said NNPC expected the force majeure on Nigeria's Bonny Light
crude to be lifted soon.
cannot give you an immediate time frame but I know that it will be
very soon", as soon as repair works are completed, Kyari said,
adding that the force majeure will likely be lifted in October.
majeure was declared September 16 on Bonny Light due to issues
affecting one of the two major pipelines leading into the grade's
terminal, a spokesman for terminal operator Shell Petroleum
Development Co. of Nigeria, or SPDC, has said.
Light exports have been continuing through the other main pipeline,
the SPDC-operated Trans Niger Pipeline, the spokesman said.
Light has seen its production affected by declarations of force
majeure at different points throughout the past year.
recently came out of a month-long force majeure on August 14, due to
issues over a leak on the Nembe Creek Trunk pipeline.