New crude sale, purchase arrangement kicks-off next month

On 12 February 2016,  Abuja – Minister of State for Petroleum Resources and Group Managing Director of the Nigerian National Petroleum Corporation, Dr. Ibe Kachikwu, says the existing crude-for-products exchange arrangement, popularly referred to as crude swap, will be replaced by a Direct-Sale–Direct-Purchase, DSDP, arrangement next month.

*Dr. Emmanuel Ibe Kachikwu, NNPC GMD.

*Dr. Emmanuel Ibe Kachikwu, NNPC GMD.

This would be happening two months behind schedule as the government’s original plan was for the new arrangement to take-off in January.

Speaking before the House of Representatives Ad-Hoc Committee investigating the NNPC’s offshore processing and crude swap arrangement for the period, 2010 to date, Kachikwu said the DSDP would save $1 billion for the Federal Government.
According to him, the new arrangement was being introduced to replace the crude oil swap initiative and the Offshore Processing Arrangement so as to introduce and entrench transparency into the crude-oil-for-product transaction by the corporation in line with global best practices.
Under the old order, crude oil was exchanged for petroleum products through third party traders at a pre-determined yield pattern.
The Minister stated that the DSDP option eliminates all the cost elements of middlemen and gives the NNPC the latitude to take control of sale and purchase of the crude oil transaction with its partners.
“When I assumed duty as the GMD of NNPC, I met the Offshore Processing Arrangement (OPA) and like you know there is always room for improvement. I and my team came up with the DSDP initiative with the aim of throwing open the bidding process. This initiative has brought transparency into the crude-for-product exchange matrix and it is in tandem with global best practices,” Dr. Kachikwu informed.
According to him also, the DSDP initiative whittles down the influence of the Minister in the selection of bid winners as it allows all the bidders to be assessed transparently based on their global and national track record of performance before the best companies with the requisite capacities are selected.
Throwing more light on the need for the introduction of the DSDP, Dr. Kachikwu noted that the policy is aimed at reducing the gaps inherent in the OPA and the losses incurred by the NNPC in the past.
He stated that the new arrangement would help the Corporation to grow indigenous capacity in the international crude oil business and generate employment opportunities for indigenous companies that are selected.
The minister informed the lawmakers that the DSDP initiative gives other government agencies such as the Bureau of Public Procurement, BPP, and Nigeria Extractive Industry and Transparency Initiative, NEITI, the opportunity to be a part of the bidding process in order to engender adherence to due process.
Speaking on some of the reported misgivings by some federal agencies over the alleged non-transparent nature of past crude-for-products exchange arrangements, the minister assured that the reconciliation process was ongoing and that going forward the Ministry of Petroleum would deploy technology to track cargoes and trans-shipment at the reception depots in order to forestall any incidence of round tripping.
Categories: Nigeria Crude Oil

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