The Nigerian National Petroleum Corporation has extended its crude-for-product swap contracts, the country’s main avenue to meet the bulk of its fuel needs, until June 2019, Reuters quoted sources familiar with the matter as saying.
The contracts allow companies, including international trading houses and indigenous firms, to lift crude oil in return for the delivery and supply of petroleum products under the direct sale of crude oil and direct purchase of petroleum products model.
Despite having a refining capacity of about 445,000 barrels per day, the nation’s refineries have been underperforming for years, making the country almost wholly dependent on imports to meet its domestic petrol and diesel needs.
The nation’s petrol consumption is roughly 40 million litres per day in the nation of almost 200 million people.
The country became increasingly reliant on the NNPC for fuel imports via swaps after a currency devaluation and recession in the last few years, which priced independent importers out of the spot market.
The NNPC’s swap contracts currently account for about 70 per cent of the country’s imports, while 30 per cent is done through the spot market, one of the sources added.
The swap contracts, known as Direct Sale Direct Purchase, came into effect in July last year and were due to end after one year. They were already extended once earlier this year to December.
The NNPC paired up foreign trading firms with local partners to do the swaps.
The corporation was said to be separately in advanced discussions with some of the swap contract holders to invest in rehabilitating its refineries.
Two consortiums were picked earlier this year but ironing out the financing of the projects has been slow, sources said.
According the report, the list of the 10 DSDP groupings comprise Trafigura and AA Rano; Petrocam and Rainoil/Falcon; Crest Mocoh and Heyden; Cepsa and Oando; Sahara and SIR; Mercuria and Matrix/Rahmaniya; Socar and Hyde; Litasco and MRS; Vitol and Varo, and Total and Total.