FG Saves $1bn Through Direct Sale Of Crude Oil
Minister of State for Petroleum Resources, Dr. Ibe Kachikwu has confirmed huge benefit accruing to the country following the replacement the offshore processing arrangement (OPA) and crude oil swap with the Direct Purchase of Petroleum Products (DSDP). According to the minister, the country saved a sum of $1 billion (approximately N360billion) for the introduction of the new method of trading crude oil for refined products known as DSDP between 2015 and 2016.
The minister disclosed this in the ministry’s monthly publication, Petroleum Periscope Newsletter, 16th Edition, which focused on the performance of the nation’s petroleum downstream sector.
Speaking in a podcast published in the online newsletter of the ministry, Dr. Kachikwu described the transition as a successful initiative which has reduced the challenges posed by the swap model.
He expressed confidence that the current administration will do all it can to ensure the availability of petroleum products throughout the country with the implementation of the DSDP programme as measures are being put in place to perfect the working of local refineries.
He said: “From where we came, what we have done and with the intent of where we are going, we have our hands rounded on the refinery issues but a whole lot of work still need to be done.”
It would be recalled that the group managing director of the Nigerian National Petroleum Corporation (NNPC), Dr. Maikanti Baru had in early February, while declaring the 2018/2019 bids for the DSDP open, said the new scheme had in the last one year saved the country over half a billion dollars and that the DSDP now guarantees that products are received by it in full and with extra margins, unlike it was with the OPA.
Under the old order, crude oil was exchanged for refined petroleum products through third party traders at a pre-determined yield pattern.
The NNPC usually allocated 445,000 barrels per day crude for the local refineries but the refineries utilise less than that and the balance of the crude is then traded off in swap deals and exports.
The corporation had in 2016 replaced the offshore processing arrangement (OPA) and crude oil swap with the DSDP arrangement, sequel to heavy criticism which trailed the contracts preserved to short-changed Nigeria.
The Nigeria Extractive Industries Transparency Initiative (NEITI) in 2015 estimated that the nation lost $966million to crude oil swap deal between 2009 and 2012; billions of naira in subsequent years until the NNPC heeded the call for the discontinuation of the OPA in April 2016.
Similarly, a report by Natural Resource Governance Institute (NRGI) in 2015 revealed that the contracts under the last administration contained many unclear or unbalanced terms and were sometimes poorly managed. The report also raised questions about some of the companies selected and concluded that NNPC’s oil sales system during this period suffered from high corruption risks and failed to maximize returns for the nation.
However, all this seemed to have changed once the new swap, DSDP, was adopted. The NRGI report had initially noted that the DSDP agreements had significantly better terms, transparency and management compared with preceding agreements, but NNPC and the DSDP contractors still control the flows of information and accountability around these large and valuable but niche deals.
The Corporation under the NNPC Act (LFN Cap. 320) is empowered to engage in all commercial activities relating to petroleum operations. Leadership