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Nigeria's crude oil is sold at a premium, contrary to allegations that the quantity which is allocated to Calson (Bermuda) Limited, a subsidiary of the Nigerian National Petroleum Corporation, which it in turn sells to Vitol SA Geneva is being discounted, with top officials of NNPC benefitting from the fraud.

Speaking with journalists in Abuja on Tuesday, the Group Executive Director, Commercial and Investment, NNPC, Mr. Aminu Babakusa explained that NNPC owns 51 per cent equity in Calson while the remaining 49 percent is held by VITOL SA Geneva.

He further explained that Calson is only allocated crude oil from the 450,000 barrels which the Federal Government sells to NNPC at the international price, with the original intention of being refined by the Port Harcourt, Warri and Kaduna refineries.

According to him, the installed capacity of all the refineries is 450,000 adding that Port Harcourt has a capacity of refining 210,000 barrels, Warri 125,000 barrels while Kaduna refinery can refine 110,000.

He said, 'These refineries cannot process all the crude because most of the time they are down.

For 10 years, they may have only worked just three years. This affected the consumption of the crude allocated to these refineries.

'NNPC now decided to sell some of the crude allocated to these refineries and once we do that, the Crude Oil Marketing Department will then invoice NNPC at the international price.

He explained that the NNPC will then sell to Calson and Calson will pay directly to NNPC account which the remits proceed to the Federation Account.

According to him, 'That is how the transaction goes and each barrel is cost along with the platts price. Each barrel is priced within the average of five days then you put certain premium in the market.

These premiums come on daily biases as the market dictates what that premium is because there are times when our own oil is not attractive to certain market.

'So any time we want to do it, we take five days back and take an average price at any time crude is lifted.

'If there is premium you add premium and if it is negative you deduct it but most of the Nigerian crude attract positive premium. Sometime it is five cents, 10 cents, one dollar or even more. And some times much lower then that because of seasonal demand.

'So there is no fraud. Calson is not given any advantage and it has never sold at any discount no matter the situation.'

Babakusa also explained that Calson does not sell to customers at the open market, preferring to use Vitol as a middleman because it lacked the expertise to do open trading.

He said, 'There is no way Calson can sale Nigeria's crude at discount because NNPC does not sale its crude at discount and they have to pay NNPC the actual money.

He said, 'Trading is very risky in any business. Even NNPC has not started doing it and all the major oil like Shell and the rest they do trading but they do not put all their oil on trading. Likewise NNPC doest not go on trading but we keep the activity of selling.

'Trading involve a lot of hedging against the future, we don't want to put our oil at risk. I think there was an agreement between the Calson and Vitol that Vitol will sale their crude and give the company certain money.

That may be the three cents margin they are talking about.

We went for a board meeting and we told Vitol to increase the margin because the market has changed. The two companies were told to go and discuss new terms.'

The Group Executive Director further explained that Calson had the right to decide to go the open market to sell Nigeria's crude to anybody who can give the company a better price.

He said, 'They may get a better price and they may not get. The market is volatile and if you do not have traders, you can easily be screwed out in the market.'

Babakusa who chairs the board of Calson noted that the management of the company were free to come to the board meeting and demand that the company stopping selling its crude to Vitol and preferred to trade in the open market.

He said, 'The board will never stop them, but this was never brought to the board but they expressed that the three cents being given to them is small and asked them to go and negotiate with Vitol.

They never said they will go out and sell on their own.

'If they say that we will ask them to go and hire good traders which we do not have in Nigeria today and we may have to open a market in London. That is what we would have asked to do but this was never done.

I know of a Nigerian company that lost over $2m in one cargo. They started like that, therefore they had to come back and attach themselves to a company that will be lifting and that way they started to learn. They are now almost seven years old in the business but their first two years, every day was a loss.

In every business you will always have a small group of business people who will control the market and control price. Anybody can come and buy from you as long as you are sure of what you are doing.'