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Nigeria's Crude Not Sold At Cheaper Rate, Says NNPC

Source: thewillnigeria.com
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Denies ripping FG of $6.
8bn with Swiss firms SAN FRANCISCO, February 25, (THEWILL) - The Nigerian National Petroleum Corporation (NNPC) Tuesday faulted a Switzerland-based organisation, Bernie Declaration,  saying it did not sell crude at lower price.

The Bernie Declaration had indicted the NNPC for allegedly working in cahoot with some Swiss companies to defraud the Federal Government of billions of dollars.

But appearing before the House of Representatives ad hoc committee investigating allegations of connivance between the NNPC and Swiss oil dealers to rob Nigeria of billions of dollars, the NNPC Group Managing Director, Engr.

Andrew Yakubu,  urged the House to dismiss the report, saying it is frivolous.

He said NNPC did not in anyway connived with a Swiss oil trading company to rob the nation over $6.

8 billion by selling crude below international market price.

Explaining the details of transaction, Yakubu said  the companies in question, Vitol and Trafigura accounted for only 30.

7 million barrels of oil out of the total of 341.
07 million barrels.
He said the 30.
7 barrels constitute  nine  percent only of the total oil lifted and fall short of the 36 percent of the total oil disposed by the NNPC in 2013 as claimed by Bernes Declaration.

'Nigerian traders collectively account for 98.
2 million barrels during the same period.
The other international traders including the "Swiss Trading Companies" account for 61.

2 million barrels while off-shore and the Nigerian refineries took 36.

2 and 38.
3 million barrels respectively,' he said.
Yakubu said  Bernes Declaration lied against the NNPC by claiming that the corporation was involved in dubious business transaction with foreign companies.

'We note the claim by the "Bernes Declaration" that the NNPC in collaboration with "Swiss Oil Trading Companies" dispose federation crude at prices lower than market value.

'We submit that our pricing strategy is aligned to international best practice in the industry.

Our prices are based on a reference to the bench mark crude Brent whose prices are published by Platts for the international trading community, a premium/ differential for individual crude grades and the selection of an option.

'Our assessment of the OSP (differentials/premium) has matched or even exceeded the market value of Nigerian crude grade published by Platts, Argus and LOR as exemplified in the following in the historical performance of the Bonny light since 2005 .

'We note the claim that Vitol and Trafigura account for over 36 percent  of the total volume disposed by the corporation.

By our records, Vitol and Trafigura account for 30.

7 million barrels out of the total of 341.
07 million barrels disposed by the Corporation in 2013 lifting.

The lifting of Trafigura and Vitol in 2013 therefore represents nine percent of the total lifting as against 36 percent reported by the 'Bernes Declaration'.

'The NNPC trading companies account for 83.
5 million barrels.
There is also the bilateral arrangement that account for 23.

6 million barrels,' he explained.
He said the selection of buyers of Nigerian crude is done on transparent and competitive basis that seeks to establish financial and technical capabilities, promotion of Nigerian content and general quality and safety assurance.

On the alleged loss of $6.
8 billion through the Vitol and Transfigura deal, the GMD explained  that the selection of traders has standard criteria which evaluate buyers' facilities, volume of transactions, turn-over and financial health of the companies which is applicable to all, including Vitol and Trafigura.

'In view of the above, we see no remote possibility of the loss of USD6.

8 billion from sales below market value to the companies described by the petitioners as "Swiss Trading Companies", he stated.

He said the 2012/2013 Term Contracts have a preponderance of Nigerian trading companies with 23 out of the 40 regular buyers.

This, according to him,  excludes the 10 Bilateral Government-Government contracts.

Over the years there has been a significant rise in Nigerian traders' participation in the disposal of Federation crude oil as shown in the chart below.

The GMD explained that 'contrary to the claim by the "Bernes Declaration" that the NNPC does not sell directly to the international market, Duke Oil and other NNPC affiliated trading companies participate in the disposal of Nigerian crude oil and account for 24.

5 percent  of the total disposals.
' He said the NNPC Act has given  the Corporation the power to supply petroleum products to the Federation as supplier of last resort, adding:  'In order to meet this obligation, 445,000 barrels of crude oil is assigned to the Corporation at international price for domestic refining.

The Corporation disposes unrefined portion of the assignment through direct export or other secondary arrangements including "Swap" to ensure procurement and delivery of refined petroleum products.

' According to him, 'The "Swap Arrangement" referred to by the "Bernes Declaration" is a known practice in the industry where equivalent value of product is exchanged for crude oil off take.

' Bernes Declaration had alleged that 100 percent  of Nigeria's  crude is  disposed through Private Trading Companies rather than the NNPC selling directly to the market with attendant loss of trading margins.

Earlier, the chairman of the ad hoc committee, who is also chairman , House Committee on Petroleum Resources (upstream),  Hon.

Muraino Ajibola,  assured stakeholders that considering the strategic role played by oil in the nation's economy; the committee would be thorough, fair and just in its investigation and recommendations.

SAINT MUGAGA, ABUJA.