* Bids to be submitted by Nov 24
* Indigenous companies could get larger share in new contracts
London, Nigeria | – Nigeria’s crude oil term lifting contracts for 2017 will be decided by mid-December, an official from state oil firm Nigerian National Petroleum Corporation, NNPC said Wednesday.
“The crude tender will close on November 24 and we expect to have new contracts in place before the end of the second week of December,” Mele Kyari, the group general manager from NNPC’s crude oil marketing division said in a statement.
The Nigerian crude oil term contracts involve the export of around 1.17 million b/d of Nigerian crude, out of the 2.2 million b/d the country produces. They are then sold by contract holders to end-users, refiners and other buyers.
Last month, NNPC issued guidelines for companies wishing to participate in the lifting of Nigerian crude for next year.
Bids for these contracts, valid for a year from January 1, are to be submitted by 1200 Nigerian time (1100 GMT) November 24, according to the tender document.
There are 27 names in the current 2016 crude term contracts including both local and foreign companies.
Oil groups Total, Shell and ExxonMobil, trading firms Trafigura and Vitol, India’s IOC and HPCL, China’s Sinopec, and indigenous trader Sahara Energy are current term contract holders.
Industry sources have said that the 2017 term contracts could see more indigenous and domestic Nigerian companies added to the list in light of renewed violence in the oil-producing Niger Delta region.
“We could also see domestic Nigerian companies getting a larger slice of the pie,” a Lagos-based oil analyst said.
Last week, Niger Delta leaders met with President Muhammadu Buhari, submitting a 16-point demand to the government including allocation of oil blocks and contracts to indigenous companies from the region, as conditions to ending militancy in the region that has severely disrupted Nigeria’s oil production and exports.
Traders said NNPC term contracts are always a tough one to call. “The NNPC term deals are totally unpredictable? There is zero pattern [between the previous ones]. The submission date is November 24? I guess it will take two to three weeks [after that],” said a trading source from a company that is a 2016 NNPC term contract holder.
Nigerian crude, which is largely light and sweet, rich in gasoline and middle distillates, is very popular among global refiners. These crudes also normally command a significant premium over Dated Brent.
But the rise in militancy has affected the reliability and regularity of its key export grades, turning off key buyers like those in India and Europe.
Secondly, these crudes have been struggling to attract the buying interest of refiners due to a glut of sweet crudes and also because they command a “higher premium” than other light sweet crudes.
Nigerian oil output plummeted to near 30-year lows of around 1.3 million b/d this summer from 2.2 million b/d earlier in the year as attacks on oil facilities in the Niger Delta rose at an alarming pace amid resurgent militancy.
The sharp drop in oil production has severely hurt Nigeria’s economy, already exacerbated by the slump in global oil prices.