Nigeria streamlines lifting of nation's crude oil

Sep 14, 2001 02:00 AM

As part of the measures to reform the oil sector, the Nigerian government has streamlined the lifting of the nation's crude oil, saying that it will henceforth grant licences to only three categories of lifters. According to the latest guidelines on the lifting of Nigerian crude oil obtained from state-run oil firm the NNPC, the first category consists of "bona fide end users" who own refineries and retail outlets abroad.
Applicants in this group are required to supply details of their facilities, markets and volumes of crude oil processed in the past three years.
The second group that is qualified to lift Nigerian crude is made up of "established and globally recognised large-volume traders" who must provide evidence of their global networks, their activities and volumes of crude oil handled in the past three years.
The third category is made up of companies that have built export oil refineries in Nigeria. Applicants are additionally required to have a minimum annual turnover of at least $ 100 mm and net worth of not less than $ 40 mm. Successful applicants must show commitment to the development of the Nigerian economy through investing in the oil sector, or any other sector agreeable to the government.

Areas in which applicants could invest include upstream investments that would enable the country to increase its national oil reserves and production capacity, downstream projects in refining, processing, distribution and storage of petroleum products.
Applicants could also invest in gas utilisation projects, solid minerals development and industries with foreign exchange earnings potentials. They are also required to post a $ 1 mm performance bond through a first-class Nigerian bank.
The government said where possible, it would "endeavour to maintain regional balance in the distribution of Nigerian crude oil contract holdings". "For the purpose of this factor, regions shall be North and South America; Western Europe and the Mediterranean; former Soviet Union and Eastern Europe; Asia and Australia, and Africa", the guidelines stated.

Nigeria produces about 2-mm bpd of crude. Revenue from oil sale accounts for more than 90 % of the nation's foreign exchange earnings. Recently, a top source at the NNPC hinted that the firm was set to revoke all existing crude oil lifting contracts. The source said the corporation was to conduct a new bid for interested crude oil lifters. He said the two-year contract between the NNPC and some of the international oil lifters expired in August.
He said the bidding for crude oil lifting would be open, as part of measures to entrench transparency and public accountability in the corporation's operations. The lifting of Nigerian crude oil has over the years been dominated by foreign firms. The bulk of the 77568343 barrels of crude oil exported by Nigeria between January and December 2000, were lifted by foreign companies.

Over the years, local companies which had indicated interest in lifting Nigerian crude oil had been marginalized, a situation not helped by the NNPC, which ironically was established to assist indigenous firms to participate fully in both the downstream and upstream sectors of the Nigerian oil industry.
Owing to the constant rebuff from the NNPC, 16 indigenous shipping firms recently have formed a conglomerate, Oil and Gas Cargo Carriers. The conglomerate announced recently that it had acquired five sea-going vessels worth 200 mm to be used in lifting Nigerian crude oil. Local firms, which in the past had applied to lift the nation's crude oil, were disqualified by the NNPC on the grounds that they had no experience in the business and so could not be relied upon.
The NNPC had used such criteria as annual turnover, performance bond and network to disqualify the local companies. Nigeria, according to Rilwanu Lukman, presidential adviser on petroleum and energy, loses more than $ 4,5 bn yearly to capital flight in the oil and gas industry.

Source: Kingsley Kubeyinje, Business Day
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