The purchase of Nigeria’s light sweet crude on the international market is poised for revival as India, which is Nigeria’s largest importer, undergoes phased reopening after a prolonged lockdown occasioned by COVID-19.
Shipping data provided by trade sources show that India’s oil imports from Africa jumped to their highest in 10 months in August as refiners switched out more expensive crude from the Middle East.
India, the world’s third biggest oil importer shipped in about 3.95 million barrels per day (bpd) of oil in August, the highest volume since April. Of the volume, African nations accounting for about 17.5%, or an eleven month high of 688,000 bpd, the data showed.
According to an analyst with Refinitiv, Ehsan Ul Haq, Nigerian oil had the advantage of lower freight, as well as the fact that spot prices of West African oil versus Brent were down in the most part of July compared with June.
He also disclosed that in order to raise revenue, Nigeria was supplying more oil in July than it pledged under the last production cut agreement between OPEC and its allies, while Angola was scouting for a new market after the Chinese cut purchases.
An internal OPEC report showed Iraq and Nigeria were the least compliant over the May-July period.
Strengthening diesel cracks also prompted Indian refiners to buy African grades, while an increase in official selling prices by key gulf producers including Saudi Arabia deterred them, Haq said.
Higher intake of Nigerian and Venezuelan oil lifted the share of OPEC’s oil in India’s overall August imports to 77.6%, the highest since January, from 67.2% last month, the data showed.
The share of Middle Eastern oil shrank to 62.4%, the lowest in three months, from 71.3% last month, while that of Latin America rose to 9.7% from 6.3%.
Nigeria, which was the 8th largest supplier to India in July, rose to No.4, pushing the U.S. to fifth position.
In a related development, the Nigerian National Petroleum Corporation (NNPC), has extended, for six months, its contracts with private oil companies to swap crude oil for fuel, even as the corporation’s legal team has saved the country about $5 billion.
The initial one-year contracts to exchange more than 300,000 barrels per day (bpd) with 15 company pairings were due to expire in October.
According to Reuters News Agency, two sources said the companies renegotiated the price agreement due to changes to fuel prices in Nigeria.
The contracts supply a large portion of Nigeria’s white products and some of its diesel and jet fuel as it has not been profitable for private importers to bring in fuel.
Nigeria recently stopped setting a petrol price cap at the pump, a decision it says will eliminate costly subsidies and enable the private sector to begin importing again.
NNPC subsidiary, PPMC still sets an ex depot price for fuels imported by NNPC. This, combined with dollar shortages, has thus far made it difficult for some importers to bring in fuels outside the contracts.
Meanwhile, the legal team of NNPC has saved the country about $5 billion. The litigation team of the corporation has also won the Leading Case Counsel Team of the 2020 Africa Arbitration Awards.
In a statement, the corporation’s group general manager, group public affairs division, Dr. Kennie Obateru, stated that the award was given to the NNPC litigation team in recognition of its stellar performance at the 8th edition of the East African International Arbitration Conference (EAIC) which held in Nairobi, Kenya, recently, with participants joining in virtually.
At the conference, aimed at promoting commercial arbitration and showcasing African lawyers and law firms that have performed well in arbitration practice, the NNPC legal team gave a presentation on the challenges and lessons learnt from arbitrations and the successes recorded.
Among the successful arbitration cases showcased by the NNPC legal team at the conference were: the IPCO (Nigeria) Vs. NNPC in respect to the dispute over the Bonny Export Terminal Project in which $367.5 million was saved after 13 years of litigation and ESSO E&P Nigeria Limited Vs. NNPC, in respect to the dispute over the interpretation of the Production Sharing Contract (PSC) covering Oil Prospecting License (OPL) 209/Oil Mining Lease (OML) 133, where the enforcement of $2.7 billion claim was dismissed.
Other recent arbitration cases presented at the conference include: ESSO & Others Vs. NNPC in respect of alleged breaches in interpretation and implementation of the PSC covering OPL 222/OML 138 with over $380.141 million saved and the Atlantic Energy Group vs. NPDC in respect of allegation of wrongful termination of Strategic Alliance Agreements over eight OMLs resulting in the award of $1.6bn in favour of NPDC.
In another development, the Minister of Information and Culture, Alhaji Lai Mohammed, on Wednesday said while previous administrations talked about modular refineries, only President Muhammadu Buhari’s government ensured their establishment.
The minister stated this at the pre-commissioning inspection of the Waltersmith’s 5000 barrels per day (bpd) modular refinery located in Ohaji-Egbema in Imo.
The project, estimated to be 97 per cent completed, is scheduled for inauguration in October.
The refinery was jointly inspected by Gov. Hope Uzodinma and the Minister of State for Education, Chukwuemeka Nwajiuba, an indigene of the state. Also on the inspection entourage were the Chairman of the Senate Committee on Information, Danladi Sankara, and the Chairman of the House of Representatives Committee on Information, Olusegun Odebunmi.
Addressing newsmen after inspection of the facilities at the project site, Mohammed said that the Buhari administration is genuinely encouraging reintegration in the oil and gas sector to make their end products cheaply available locally, create employment and end crude oil exportation.
He said the first phase of the project to be commissioned would contribute about 271 million litres of refined products, including Diesel, Naptha, HFO and Kerosene, annually to the domestic market and create both direct and indirect jobs.
The second phase, according to him, will deliver 25,000 bpd crude and condensate refinery, an upgrade on the 5,000bpd modular refinery and designed to produce gasoline, diesel, LPG, kerosene and aviation fuel.
“We can show Nigerians that while every previous administration has been talking about modular refinery, no government has succeeded in realising the dream of bringing it alive.
“I am sure that before many of us came here we did not know what a modular refinery looks like.
“But for this tour, we would not have appreciated the sheer magnitude of investments in this particular project.
“Having listened and followed the presentations, I am extremely proud to be a Nigerian, especially when the chairman told us that from the board to the cleaner of this company, there is no single non-Nigerian.
“What we have here today in Waltersmith is a good example of reintegration of our resources.
“No longer are we going to have resources and be exporting them without making use of the resources by the process of adding value to it,” the minister said.
The minister disclosed that the refinery, which had its groundbreaking ceremony in 2018, is a joint venture between Waltersmith Petrochemical Ltd and the Nigerian Content Development and Monitoring Board (NCDMB)
While Waltersmith, a leading independent Nigerian energy company, has 70 per cent equity in the business, NCDMB, a Federal Government parastatal agency, has 30 per cent stake in the venture.
Mohammed noted that with more of the kind of Watersmith’s modular refinery, fuel subsidy would be completely eradicated as the country would be able to get its products locally at a cheaper price.
He added that besides the fact that production would be more than local consumption, the medium scale industry in the downstream sector of the petroleum industry would grow.