NIGERIA: FG Cuts Supplies To Global Oil Traders

By Emmanuel Okubenji, Daily Times - Nigeria
The Federal Government has announced plans to award about $60 billion annual supply contracts to local firms.

According to a document sent to the winning firms, FG has allocated about 1.6 million barrels per day (bpd) through term contracts to 21 Nigerian firms, and 29 global companies.

The number of companies on the list grew from last year’s 45 and included many small African firms such as Tempo and Benny Peters, the document showed.

The oil, which amounts to around 580 million barrels sold over the next 12 months, is worth nearly $60 billion based on current premiums of the light, sweet crude to Brent futures.

The tender result, awaited since April, showed that around 45 % of the allocated oil was assigned for companies either based in Nigeria or owned by Nigerian companies including the Nigerian National Petroleum Corporation (NNPC) and its subsidiary Duke Oil, which doubled the size of its contract from last year to 60,000 bpd.

Global oil traders such as Glencore, Vitol and Trafigura, who have traditionally had a strong presence in the country, last year had their supplies halved to 30,000 bpd while Gunvor and Mercuria, Swiss-based traders, stayed unchanged from 2011 at 30,000 bpd.

"The desire to encourage Nigerian participation is understandable, but it only helps the country if these are legitimate companies, chosen in a manner that was competitive and free from patronage," Alexandra Gillies, head of governance at Revenue Watch Institute, said.

She added that the list of companies should be scrutinised carefully to ensure that all are operational oil firms and were fairly chosen.

Meanwhile, other winners include Indian Oil Corp and China's Unipec, the trading arm of Sinopec Corp, which both received 60,000-bpd contracts.