Crude oil swap, fuel scarcity and matters arising

Despite the fact that Nigeria is one of the major oil producing countries in the world, Nigerians still experience fuel scarcity. Hence, as a way of finding solution to the intermittent fuel scarcity in the country, the Nigerian government introduced what is called Offshore Processing Arrangement (OPA) and Crude Oil Swap regime which the Nigerian […]

Despite the fact that Nigeria is one of the major oil producing countries in the world, Nigerians still experience fuel scarcity. Hence, as a way of finding solution to the intermittent fuel scarcity in the country, the Nigerian government introduced what is called Offshore Processing Arrangement (OPA) and Crude Oil Swap regime which the Nigerian National Petroleum Corporation (NNPC) allocates crude oil to oil trading companies in exchange for processed petroleum products.

The Crude Oil Swap regime now known as DSDP lacked total transparency as it only served vested interests as against national interest.

Analysts are of the view that Nigeria is at the losing end as it never get real value from the deals. For Instance, the Nigerian Extractive Industry Transparency Initiative (NEITI), an extractive industry watchdog in its 2015 report estimated that Nigeria lost $966 million to crude oil swap deals between 2009 and 2012 as well as billions of naira in subsequent years until it was canceled in 2016.

Because of the criticism that trailed the oil swap regime, the NNPC in 2016 replaced it with a new import scheme called Direct Sales and Direct Purchase programme (DSDP) since the earlier OPA and crude oil swap regime short changed Nigeria.

However, critics are saying the new DSDP programme is like an old wine in a new bottle because the scheme which means direct sales of crude oil to refineries or consultants who in turn supply NNPC with the refined petroleum products is not effective and error free.

This year’s DSDP contract kicked off on April 1st and is expected to last for one year. The worth is over $6 billion if the crude oil price remains at $45 per barrel.

No fewer than 128 local and international oil and gas companies in February submitted bid to participate in the programme, but only 10 companies were chosen. The yardsticks or parameters used in selecting the 10 companies as well as their terms of engagement remains opaque as there was no atom of transparency in the entire process.

The said agreement for the lifting of over 300, 000 barrels of crude oil per day in exchange for imported fuels was signed with a foreign company as a partner.

Whether the 10 chosen companies have the capacity to meet the 35 million litres of fuel needed nationwide on daily basis is a different story.

The companies are; Vitol – Varo Energy, Cepsa -Oando, Petrocam Trading – Rainoil Ltd, Trafiqura – AA Rano Nigeria, Totsa – Total Nigeria, Socar Trading – Hyde Energy, Mocah – Heyden Petroleum, Mercuria – Matrix Energy, MRS Oil/Gas – Litasco and finally, SIR Refinery – Sahara Energy Resources Ltd.

Despite the new import scheme coupled with the fact that NNPC gets 445, 000 barrels of crude oil per day for its local refineries, Nigerians still experience fuel scarcity!

The unanswered question is what is the essence of Crude Oil Swap now known as Direct Sales and Direct Purchase scheme when it cannot forestall fuel scarcity in the country?

What is NNPC doing with the 445, 000 barrels of crude oil allocated to it daily?

Why is our depots empty without fuel when we have NNPC and 10 other companies lifting crude oil from Nigeria?

Until some of the questions raised here are answered by relevant bodies, Nigerians will still wallow in intermittent fuel scarcity without hope of elimination.

Brown Justice, Abuja.