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Crude Oil

NNPC Closes Direct Sale and Direct Purchase Deals With 26 Firms

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NNPC Nigeria

The Nigerian National Petroleum Corporation (NNPC) has picked 26 foreign and local companies as well as 12 countries to lift the country’s crude oil for the next two years.

The crude term contracts, expected to run from 2021 through 2023, would see the firms and the selected nations, which would operate on a Government-to-Government (G2G) basis to purchase the commodity from the national oil company.

The deal is coming less than a week after the corporation chose 16 oil and gas consortia for its new crude-for-fuel swap contracts for one year starting in August.

The contracts, known as Direct Sale, Direct Purchase (DSDP) are high-stakes agreements used to supply nearly all of Nigeria’s petrol needs as well as cover some of its diesel and jet fuel consumption.

However, in the fresh crude oil term agreements, it was observed that the names of majority of the companies involved in the DSDP deal also appeared in the list of those picked by the national oil company for the crude term contracts.

The list sighted by the media showed that the preferred companies included Sahara Energy Resources Limited, Oando, Duke oil (an NNPC subsidiary), Petrogas, AA Rano, MRS, Mercuria and Vitol.

Other oil and gas concerns which scaled the NNPC selection hurdle were Oceanbed Trading Limited, Levene Energy, Bono Energy , Mocoh Energy, BP Oil, West Africa Gas Limited, Litasco SA, Emadeb, Hyde, Matrix and Brittania-U.

Other names listed by the NNPC as having qualified for the contracts included Masters, AMG, Casiva, Barbedos, Trafigura, Hindustan and Patermina.

NNPC has its own equity share of crude oil from its Joint Ventures (JVs), usually shared on a 60 to 40 basis and thereafter appoints companies and issues licences to lift its share of the oil on a Free on Board (FOB) basis.

The companies and countries nominate ships that transport the crude which is sold in the international market. Sometimes, the NNPC also awards contracts to governments to carry out the business.

In the document approving the qualified countries, China, Niger, Cote D’voire, Ghana, India, Togo, South Africa came tops, while Sierra Leone, Liberia, Turkey, Senegal, and Fujaira also made the cut.

Typically, entities qualified to take part in the contract bid are divided into four categories, namely a bonafide end user who owns a refinery and or retail outlets that can process Nigerian crude oil grades.

For the government to government contracts, or what is termed “bilateral relationships”, with what the corporation terms “high energy consuming nations”, bidding nations must provide proof that the entity is wholly owned by the relevant country or provide evidence of a bilateral agreement with the designated nation.

The third category is the internationally established and globally recognised large volume crude oil traders, while the fourth classification are indigenous companies engaged in Nigeria oil and gas downstream business activities.

In addition, qualifying foreign companies must demonstrate a minimum annual turnover of $500 million or the naira equivalent and a net worth of not less than $250 million or the naira equivalent for the previous financial year.

For indigenous firms, they are required to have a minimum turnover of $200 million or the naira equivalent and a net worth of $100 million for the preceding financial year ending.

Bidders are also to show their ability to handle supplies of crude and must list facilities and products processed or sold over the last three years, in addition to disclosing links to NNPC or the Bureau of Public Procurement (BPE) and confirming that directors have not been convicted of fraud or financial impropriety.

As with all Nigerian tenders, NNPC also highlights that the local content law must be strictly adhered to in terms of, among others, the use of Nigerian shipping companies, insurance and banks where possible.

In the past, Civil Society Organisations (CSOs) in the country’s oil and gas space had argued that G2G contracts with smaller, non-refining countries have high governance risks and low policy benefits for Nigeria.

For instance the Nigeria Natural Resource Charter (NNRC) has asked that term contracts should be carried out through a transparent and competitive tender process that includes robust pre-qualification standards and an end of sales to smaller non-refining countries unless NNPC can publicly explain the deals’ policy benefits.

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Crude Oil

Oil Prices Hit Multi-year Highs on Monday

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Crude oil - Investors King

Oil prices hit multi-year highs on Monday buoyed by recovering demand and high natural gas and coal prices encouraging users to switch to fuel oil and diesel for power generation.

Brent crude oil futures were up 59 cents, or 0.7%, to $85.45 a barrel by 0900 GMT, after hitting $86.04, their highest level since October 2018.

U.S. West Texas Intermediate (WTI) crude futures climbed 90 cents, or 1.1%, to $83.18 a barrel, after hitting a $83.73, their highest since October 2014.

Both contracts rose by at least 3% last week.

“Easing restrictions around the world are likely to help the recovery in fuel consumption,” analysts at ANZ bank said in a note, adding that gas-to-oil switching for power generation alone could boost demand by as much as 450,000 barrels per day in the fourth quarter.

Cold temperatures in the northern hemisphere are also expected to worsen an oil supply deficit, said Edward Moya, senior analyst at OANDA.

“The oil market deficit seems poised to get worse as the energy crunch will intensify as the weather in the north has already started to get colder,” he said.

“As coal, electricity, and natural gas shortages lead to additional demand for crude, it appears that won’t be accompanied by significantly extra barrels from OPEC+ or the U.S.,” he said.

Prime Minister Fumio Kishida said on Monday that Japan would urge oil producers to increase output and take steps to cushion the impact of surging energy costs on industry.

Chinese data showed third-quarter economic growth fell to its lowest level in a year hurt by power shortages, supply bottlenecks and sporadic COVID-19 outbreaks.

China’s daily crude processing rate in September also fell its lowest level since May 2020 as a feedstock shortage and environmental inspections crippled operations at refineries, while independent refiners faced tightening crude import quotas.

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Crude Oil

Oil and Gas Companies in Nigeria

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Oil - Investors King

Nigeria is an oil reach nation with several oil and gas companies operating in Africa’s largest economy.  However, only ten oil and gas companies are listed on the Nigerian Exchange Limited (NGX).

Before we discuss in detail each of the listed oil and gas companies in Nigeria. A short background on Africa’s largest economy will help throw more light on the significance of the oil and gas companies or the entire oil sector to the Nigerian economy.

Nigeria is a petrol-dollar economy, which means Africa’s most populous nation, sells crude oil and use its proceed to service the economy. In fact, the Nigerian Naira is backed by crude oil like Canadian Dollar and other commodity-dependent economies.

But because the Central Bank of Nigeria (CBN) pegged the Naira against its global counterparts, the local currency does not reflect succinctly the fluctuation in global oil prices like other crude oil-dependent currencies.

Since global oil prices rebounded with the gradual reopening of economies, the oil and gas companies in Nigeria have also rebounded from the 2020 record low of $15 per barrel. The oil and gas sector has gained 62.76 percent from the year to date, according to the NGX Oil and Gas Index.

The index gauge price movements in 10 listed oil and gas companies in Nigeria.  However, there are several oil and gas companies in Nigeria not listed on the Nigerian Exchange Limited.

Oil and Gas Companies Listed on the Nigerian Exchange Limited (NGX)

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Crude Oil

Oil Prices Extend Gains on Friday After Saudis Dismiss Supply Concerns

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Oil

Oil prices extended gains on Friday after Prince Abdulaziz bin Salman, Saudi Energy Minister dismissed calls for more crude oil supply on Thursday.

Brent crude oil, against which Nigerian oil is priced, rose to $84.92 per barrel at around 8:31 am Nigerian time. The U.S West Texas Intermediate crude oil also responded positively to the comment, rising to $81.56 per barrel on Friday.

Prince Abdulaziz had stated on Thursday that OPEC plus efforts were enough to protect the oil market from wild price volatility seen in coal and natural gas markets.

“What we see in the oil market today is an incremental (price) increase of 29%, vis-à-vis 500% increases in (natural) gas prices, 300% increases in coal prices, 200% increases in NGLs (natural gas liquids) ….”

He further stated that the Organization of the Petroleum Exporting Countries and allies led by Russia, have done a “remarkable” job acting as “so-called regulator of the oil market,” he said.

“Gas markets, coal markets, other sources of energy need a regulator. This situation is telling us that people need to copy and paste what OPEC+ has done and what it has achieved.”

Prince Abdulaziz explained that OPEC plus will add 400,000 barrels per day in November and do the same in December and subsequent months. The increase will be gradual he said.

“We want to make sure that we reduce those excess capacities that we have developed as a result of COVID,” he said, adding that OPEC+ wanted to do it “in a gradual, phased-in approach”.

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