FG awards N6.4trn oil contracts to 28 firms

on   /   in News 12:25 am   /   Comments

By  JONAH NWOKPOKU

The Federal Government has increased its local content drive by awarding most of its long-term oil contracts worth an estimated $40 billion, about N6.4 trillion a year, to 28 Nigerian-owned firms, according to a confidential document obtained by Reuters’ news agency.

The implication of this is that global traders will need to partner with them to access crude from the country.

“It is incredible to have an OPEC member selling its oil this way. There’s one international trading house and barely any refiners on the list,” said a senior oil trading source who formerly bought crude oil from Nigeria.

Also reacting, non-governmental organisations, such as Switzerland’s The Berne Declaration, have criticised the sales method, saying it is opaque and offers no guarantee that the oil is sold at fair value but the government has repeatedly denied there is any lack of transparency in the process.

The contracts cover around 340 million barrels of oil, worth close to $40 billion annually, based on current Brent prices, and run for a year, though they can be renewed. They were allocated to just 28 companies, as against around 50 in 2012, the last time they were awarded.

In a break with tradition, no contracts were given directly to global trading houses, Glencore Xstrata, Vitol, Trafigura or Gunvor, with only Switzerland’s Mercuria winning a contract, according to a list that four industry sources verified as accurate.

The trading companies that missed out on direct oil contracts declined to comment.

The list, released by the Nigerian National Petroleum Corporation, NNPC, is preliminary and subject to revision. NNPC officials did not immediately respond to requests for comment.

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