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Nigeria Extends Term Crude Deadline

Source: Reuters 4/30/2012, Location: Africa

Nigerian National Petroleum Corp (NNPC) has extended the deadline for companies to submit applications for 2012-2013 crude oil term contracts to May 11 from April 5.

Traders said the later deadline would ensure that companies that sign the contracts comply with the Nigerian Content Act, while the government probes corruption in the oil industry of Africa's biggest producer. Last year the term contracts with NNPC were worth about $30 billion. Barrels were awarded to independent traders such as Vitol, Trafigura and Glencore. Initially, NNPC solicited applications for the 2012-2013 contract on March 21 and 22, with the original deadline of April 5.

"All interested applicants are given two weeks effective April 30-May 11 to submit their applications for lifting of Nigerian crude oil during the 2012/2013 contract years," NNPC said in an invitation document, which was seen by Reuters.

The latest invitation said applicants should be either refineries, "established and globally recognised volume traders" or Nigerian oil and gas companies. Nigeria exports about 2 million barrels of crude per day. The barrels that are subject to be sold via annual tenders exclude equity volumes held by oil majors such as Royal Dutch Shell. The NNPC invitation does not specify the tendered volume.

Key Chinese companies such as Unipec, the trading unit of Asia's largest refiner Sinochem , do not participate, because they are secured by bilateral government agreements. The invitation does not specify when the 2012-2013 term will begin. Traders, who received the invitation, said they would expect the term to run for 12 months from June or July. At least one big independent trading house in Geneva said the company had participated in the annual tender. The trader declined to be named.

Nigerian light crude with low-sulphur content used to be a vital source of profit for independent trading houses, because it is easier to process into more value-added products such as gasoline and diesel. But it has been becoming difficult to make a sizable profit from trading Nigerian crude this year due to an fall in spot differentials.

"As a trader, it is very important to have presence in the Nigerian market," the trader said. "But sometimes you have to take pain. Recently, spot premiums on some cargoes fell below the OSP, depending on the timing of the sale," the trader said, referring to the official selling prices, which are set by NNPC every month and traders need to pay the state-run firm.

The May OSPs for Nigerian key crude Bonny Light BFO-BON and Qua Iboe BFO-QUA have been set at dated Brent plus $2.60 a barrel. But these crude oils have fallen to two year-lows of about $1.50 premiums to the benchmark due to the quicker-than-expected return of Libyan crude to pre-war levels and reduced demand from the United States and Europe, traders said earlier in April.

Other traders said it was common to receive less than the volume specified in the contract, regardless of whether the lifter is an equity holder or a trader with term contracts, due partly to sporadic sabotage of oil facilities in the country, which often lead to loading delays or halts.

"You very rarely get what they say you get," one cargo lifter said, who also declined to be identified.

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